Category: Buying Advice

If you are paying attention to the headlines, you know that a big change happened in the Real Estate industry that went into effect last Saturday. It was the culmination of a lawsuit brought by the Department of Justice against the National Association of Realtors and several of the largest National Real Estate Brokerages.

The gist of the lawsuit was that the traditional method of agents who represent buyers to be paid resulted from the listing contract between the listing agent and the seller of a home. The Department of Justice determined that this was price fixing because it excluded the buyer from having any influence on the commission that their agent was paid. The courts agreed and in May a fine of 418 million dollars was imposed upon the defendants.

How does this affect you? It’s going to have a big impact when you buy or sell a home.

When you sell a home, your Realtor can not provide any information in the Multiple Listing Service that indicates whether or not you are willing to pay the buyer’s agent commission. I suppose that means that you could benefit because you only need to agree to pay your Realtor that you have hired to sell your property. Sounds pretty good, right? However you need to consider the situation that most buyers are in. They’re the folks who have to have enough money to pay their down payment and their closing costs. That is a big sum of money. Most buyers are pushing themselves financially to come up with these funds. As a seller, you are likely enjoying years of equity that has built up in your home. At the time of selling, you will be flush with cash, in most cases. Paying the buyer’s agent commission is likely more affordable for the seller than it is for the buyer.

As a buyer, you will have to enter into a contract with your buyer’s agent in which you agree to pay your Realtor. Being a Realtor is not a charity situation. Realtors need to know that they will be paid. If a seller declines to pay the buyer’s agent, the buyer will need to do so. So be prepared to financially plan to pay a buyer’s agent commission. That commission is negotiable and is between you and your Realtor.

From my perspective, I think that this new law will be very hard on buyers: particularly first time home buyers. That entry level market is already the most competitive and the most likely to involve multiple offers. The typical first time buyer is putting down a very small down payment. That already bodes badly for them when they are competing against investors who have large down payments or all cash. Now imagine that the seller has several offers and they are determining which brings them the most benefit. Are they going to go with the offer with a small down payment who also asks them to pay the buyer side commission? Nope. Not when there is an offer that not only has more cash on the table but also doesn’t ask them to pay an extra commission.

Last, I want to mention that it is now against the law for a Realtor who is not representing the seller to show a houses to a buyer without a Buyer Broker Compensation Agreement. So if you are casually calling around and asking Realtors to show you houses, you are going to have to have a signed contract to get into any house that the Realtor is not the listing agent for.

There really is nothing so certain as change. We will all get used to working with these new rules. I do like that it puts the buyer side commission right up front and creates an honest conversation. I also think it is not good for entry level buyers, but we will figure this out. We can do it.

Dianne

In the early years of my career, shake roofs were considered to be the premium roof that a person could put onto a house. Because of their thickness, they create more shadows that make the roof more interesting. Entire neighborhoods were constructed where shake roofs were a requirement of owning a house. The thought being that it made the entire neighborhood look better.

Then, a few years into my career, there was a horrific fire in Orinda, California. Entire neighborhoods were wiped out. It was very publicly acknowledged that the fire grew so big, and spread so fast, because of the shake roofs on most of the houses.

There was a very real change in how people looked at owning a house with a shake roof. Now, there is a new twist.

Two weeks ago, representing a buyer, I was involved in the sale of a home in Westlake that had a shake roof. My client and I discussed this roof at length, the additional fire hazard, but also the need for professional maintenance. My client loved the house and made an offer that was accepted.

That’s when the problem was discovered. We could not find an insurance company willing to write a home owner’s policy for the house because of the shake roof. It’s important that I point out that the roof was 20 years old. It had been beautifully maintained, including just recently, but insurance agents that we talked to said the cut off for insuring a shake roof is 20 years. If it were newer, they would insure it.

There have been so many horrific fires in the last 10 years or so. I can totally understand that insurance guidelines have been tightened as a result. I can not say that there is not an insurance company that would insure a 20 year old shake roof, we just had no luck finding one.

So it’s something to have on your radar when you are buying a house. It’s also something to have on your radar if you are planning to sell a house with a shake roof.

I hope that you have found this information useful,

Dianne

As January comes to a close, I want to take advantage of the fact that January is Radon Awareness Month. This is important as you buy or sell a home, but it’s also important simply as a human who lives in a contained environment. Whether you are buying or sell or not, you should test your house for radon.

Radon is a naturally occurring gas that is given off by granite boulders. These boulders are buried deep in the ground. You can’t see them, so you don’t know if they are there or not. This is why everyone should be doing radon tests.

I first became concerned about radon when I read an article in a local newspaper about 20 years ago. A resident of my neighborhood, in the Lake Grove section of Lake Oswego, died of lung cancer. He had been a non-smoker. After his death, his wife checked their home for radon and discovered elevated levels. It was the likely cause of his death.

It’s estimated that 20,000 deaths in the US each year are caused by radon exposure. It is the second leading cause of lung cancer, after cigarette exposure.

While some parts of the metro area are known for elevated radon levels (the Alameda Ridge is Northeast Portland is often referred to as Radon Ridge), radon can be found in Lake Oswego. I sold a house in Village on the Lake a number of years ago and radon was found. It was a lake-front house.

In Oregon, radon is fairly common in the northern Willamette Valley. This is a result of the Great Missoula Flood that occurred thousands of years ago. A huge ice dam formed in the area of what is now Sandpoint, Idaho. It contained a lake that went deep into Montana. When the ice melted it released a huge flow of water and debris that came across Eastern Washington, dug out the Columbia River Gorge, and came to rest in the Willamette Valley. This flow contained granite boulders that, today, are the primary source of radon in homes in this area.

While there is no known safe level of radon, it can be measured. The test is simple. You can buy a test at most home improvement stores. You set two canisters in your house for several days, then mail them off to a lab, and you get emailed results within about 10 days. It’s been awhile since I’ve done it this way, but I believe it costs under $100. Or you can hire a professional. This costs about $150. They set a test box into your house for 2 days and you get same day results.

Correcting radon is usually under $2000. Not super expensive.

My point here is that it’s easy to do. Realtors in Oregon are trained to make radon testing a part of the home inspection process. But do the test for the benefit of yourself even if you aren’t selling.

I hope you find this information helpful. Here’s to going into February living in the safest and healthiest home possible.

Dianne

When I started in Real Estate 35 years ago, our sale agreement was one page, legal size, and there were few, if any, supplemental forms. If something additional needed to be added, like a home inspection, I took out a blank addendum and wrote it up myself. Over the years many, many forms have been added. The sale agreement is 11 pages long and there are about 100 supplemental forms.

Realtors are not attorneys, so it’s a good thing that we no longer write our own addendums for things like home inspections. However, we do have to know the forms inside and out. We use them and we need to be able to explain what they mean. This requires a lot of continuing education. Now, add to the mix that an entire new set of paperwork is being rolled out.

The forms that we have historically used were developed by Oregon Real Estate Forms, OREF. This entity primarily consisted of the two largest Realtor Associations in the state: Portland Metro and Eugene.

Now the Oregon Association of Realtors has developed a new set of forms. The old ones are not being retired, instead we will have 2 complete sets of forms to use and both are acceptable. This means that Realtors need to be training and learning about these new forms. There are pluses and minuses to both. I also think it’s likely that eventually one will dominate and my prediction is that it will be the new forms.

I am very proud to say that Linda and I have both been training for the past 2 months to become knowledgeable about the new forms. I think we are positioning ourselves to give the best service possible to our clients. I also want to give a shout out to Oregon First. Our company started this training, and went in depth with it, from the get go.

So, Linda and I are adapting and learning. It really is exciting and it feels good to know that we are positioning ourselves to give you the best experience possible when you buy or sell a house. We are here to be of help!

Dianne

I want to talk about the elephant in the room, rising interest rates. Just yesterday the Federal Reserve raised the Federal rate by .5% to between $4.25 and $4.5%.

The Federal Reserve Rate is the rate set by the Federal Reserve to dictate the cost of money when banks borrow from one another. If the banks are paying more for money, it just makes sense that the increase gets passed along to the consumer. That is how banks make money. It’s why they are in business.

I do think that the increased cost of mortgages is having a impact on the real estate market. Higher interest rates make homes less affordable. Is this going to cause a housing decline? In a word, no.

From what I have been hearing the current situation is likely short term

Several months ago I listened to a Bloomberg podcast that featured 3 economists. The consensus was that the inventory is so low, that the demand for housing will keep the real estate market strong.

At the beginning of the Great Recession, in about 2008, builders pretty much not only stopped building, but they also stopped laying the ground work for new neighborhoods. Coming out of the recession, in about 2014, the home building industry rebounded, but there were about 6 years of missing inventory and they just simply have not caught up, even to this day. To meet our population needs, Nationwide, we should be building 3,000,000 new housing units per year. These are houses, condos, and apartments. We have only been building 1,300,000 per year: not even half of the population need. It is going to take decades to catch up.

Economics is all about supply and demand. With the demand high and supply low, that supports housing values.

The other source of some interesting information was a Brian Buffini class that I took on Monday. It featured Lawrence Yun, the chief economist for the National Association of Realtors. Their discussion included several key points:

• Government regulations put into affect after the Great Recession tightened up the mortgage lending industry so that people actually had to qualify for their loans and prove credit worthiness and employment stability in order to get a mortgage. In other words, people can afford to make their payments.
• There is usually a 2% margin between the Federal rate and the mortgages rates. There is an anomaly happening where the spread is currently 3%. This means that the Federal rate can increase without there being an increase in the mortgage rates.
• Mr Yun predicts that 2023 will see interest rates come back down within the year to under 6%
• Mr Buffini predicts that 2023 will be flat with little or no home appreciation. However, he thinks that in 2024 the housing market will rebound with as much as 10% appreciation.

Here are my thoughts. It remains a great time to buy a house. With houses taking longer to sell, people who are selling are more negotiable. For a buyer, that means addressing repairs within the sale and negotiation on the price when you make an offer. For people wanting to sell, the inventory is still very, very low. Yes, it will take 30-60 days, but your house will sell and you likely continue to have a great deal of equity.

I have to say that no one knows for sure. These are simply thoughts shared by people with some knowledge and whose opinions I respect.

As always, thank you for reading the blotter.

Dianne

Years ago, I realized that the number 20 is very powerful in real estate. It applies both when buying and when selling.

When Buying

I think most people do the bulk of their house hunting online. The Internet is an amazing tool. However, it is also super important to physically visit houses. I think you need to go into them to get a feeling for value. What does $500,000 look like? By the time that you have gone through 20 houses you will have a strong sense of value. You’ll know what feels like a good deal and what feels like it is overpriced.

This does not mean that you absolutely have to see exactly 20 houses. No. In fact, the first house that my husband and I bought was the first house that we looked at. We walked in, fell in love, and made an offer.

20 is simply a good guide and a way to set some expectations for the experience of house hunting.

When Selling

When selling, you need about 20 showings to get an offer. Again, it can happen faster than that, but 20 is a good barometer.

So, if you put your house on the market and you get 20 showings in the first few days, you are going to get an offer quickly.

If the reverse happens and you get 2 showings the first week, and then 2 the next, this means you’re going to be on the market for about 10 weeks to get an offer. If you need an offer more quickly, then you need to drop the price or fix what people are objecting to.

If you get 20 showings and no offer happens, again, you need to drop the price or fix what people are objecting to.

I hope you find this concept useful. As always, thanks for reading the blotter.

Dianne