Evaluating Mortgage Loan Programs

 The residential lending process can be confusing for consumers and beginning real estate agents

By Jeff Sorg, OnlineEd Blog

(August 26, 2020)

 OnlineEd – The residential lending process can be confusing for consumers and beginning real estate agents. While most real estate agents will send their clients to a mortgage broker for the qualifying process, it is still important for the new agent to gain an understanding of some key loan terminology to be better able to their help clients understand which loan program might be best for their particular financial situation, and which offers the best savings over the loan term.

These are some key features to understand when your client is evaluating different loan programs:

    1. Loan origination fees – These are fees charged by a lender to cover the administrative costs of processing a loan. The origination fee is expressed in terms of points, with one point being 1% of the loan amount.
    2. Discount points – Discount points lower the monthly loan payment by collecting a lump sum payment of interest upfront at transaction closing. This lump sum payment will fund the loan at a lower interest rate for the entire term of the loan. The number of discount points charged by the lender will correspond with the market interest rate as compared with the consumer’s requested interest rate. The lower the underlying interest rate in contrast to the market rate, the more discount points will be charged. One discount point is 1% of the loan amount.
    3. Buydowns – A buydown is also interest paid to the lender upfront in a lump sum. In exchange for this payment, the lender agrees to lower the interest rate, which, in turn, reduces the monthly payment for a specified period. Buydowns serve the same function as discount points. However, they do not always work in the same way. For a conventional loan, it does not matter who pays the buydown. Additionally, buydowns can be used with both fixed-rate and adjustable-rate loans, and they can be either temporary or permanent. Temporary buydowns are the most common and apply for the first year or first few years of the loan. Buydowns can be paid by the buyer or the seller and are commonly used when the borrower cannot qualify because the payments are too high. The temporary buydown allows the buyer to be eligible for the loan on the initial lower payment with the buydown applicable for the first one, two, or three years. A permanent buydown allows a borrower to finance up to 3 discount points into the loan amount.
  1. Truth in Lending (Regulation Z) – The purpose of the Truth in Lending Act, implemented by Regulation Z, is to compel lenders to disclose loan terms to prospective borrowers for comparison purposes. All residential loans, except seller financing, are covered under Truth in Lending. All loan fees, loan terms, and the APR (Annual Percentage Rate) must be disclosed. The APR is the actual annual percentage rate of interest being charged and is composed of the annual interest rate plus other loan fees such as origination fees, discount points, and buydowns. Under Regulation Z, a consumer has a three-day right to rescind (cancel) a credit transaction, but this right to cancel does not apply to residential first mortgages.
  2. Real Estate Settlement Procedures Act (RESPA) – RESPA applies to all federally related loans secured with a mortgage on one-to-four residential properties. RESPA requires the following:Disclosures are required at various stages in the loan and settlement process:
    1. Disclosures at loan application – Special Information Booklet, Loan Estimate, HELOC brochure, and servicing disclosure statement.
    2. Disclosures before loan settlement – AfBA disclosure and Closing Disclosure. AfBA stands for Affiliated Business Disclosure Arrangement.
    3. Disclosures at loan settlement – Initial escrow statement.

    RESPA prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan. Also, RESPA prohibits fee splitting and receiving unearned fees for services not performed. However, nothing in the law prohibits real estate agents from identifying and recommending service providers who will perform quality services for the client.

  3. Applying and Qualifying for a Residential Loan – To obtain a residential mortgage loan, a buyer must complete a loan application and submit it and any required supporting documentation to their mortgage broker. The completed application and supporting documentation will then be forwarded to loan underwriting. Underwriting is the qualifying process in which the loan documentation of the borrower is evaluated for approval or disapproval. The type of loan product selected and whether the product will be a conventional or government product will be determined by the borrower’s profile as it applies to the lender’s various qualifying ratios. Qualifying ratios are based on the type of loan program and its underwriting guidelines. Affordable housing programs and governmental programs, such as FHA and VA, all have unique qualifying ratios that apply.
  4. Residential Loan Types – Residential loans are either conventional loans or non-conventional loans. The term conventional is used to identify those loans that are not insured, guaranteed, or initiated by any governmental body. The majority of non-conventional loans are government loan products. Additionally, conventional loans may be classified as either conforming or non-conforming. Loan products that fall within the established maximum loan amount are known as conforming loans. Non-conforming loans are those that exceed the maximum loan amount.
  5. Conventional loan products – Following are the most common conventional loan products available in the marketplace:
    1. Fixed-rate loans – The fixed-rate mortgage remains the most popular conventional loan. The most common period for the loan to amortize (i.e., retire the debt in equal installment) is 30 years. However, for those borrowers wishing to retire the debt in less time, shorter fixed terms are available. A typical shorter loan amortization period is the 15-year loan. The fixed-rate loan usually calls for one payment each month.
    2. Adjustable-rate loans – When the interest rate for the loan is not fixed, it is an adjustable-rate mortgage (ARM). Interest rates for ARMs consist of an index rate plus a margin. Usually, this type of loan is used in cases where a borrower needs or wants a lower interest rate in the initial years of the loan. The index rate is the interest rate that reflects general market conditions. The margin The index changes based on the market. Changes in the index, along with the loan’s margin, will determine the changes to the interest rate for an adjustable-rate loan. The margin is the number of percentage points added to the index by the mortgage lender to set your interest rate on an adjustable-rate mortgage (ARM) after the initial rate period ends. Index + Margin = Loan Interest Rate.
  6. Government loan programs – The following are the most prevalent government loan programs:
    1. FHA loans – Among government loan agencies, the largest is the Federal Housing Administration (FHA). Today, FHA insures loans initiated by participating lenders. In essence, it places the credit of the U.S. Government behind the borrower by insuring the loan against default. When a default happens, the lender can recover losses from the FHA insurance pool. FHA mortgage insurance is called Mortgage Insurance Premium (MIP) to set it apart from insurance provided by Private Mortgage Insurance (PMI). MIP is paid by all FHA borrowers and is calculated to be sufficient to cover any loss.FHA loans are easier to qualify for than are conventional loans. An FHA loan will have a lower interest rate than a conventional loan, mainly if a buyer is unable to come up with a sizeable down payment and is obtaining both a first and second mortgage to finance a home. The cash investment of the borrower is minimal, thereby opening homeownership to persons who could not otherwise have purchased a home. Also, the qualifying ratios are more favorable to the borrower. MIP is required on all FHA loans regardless of the size of the down payment.
    2. VA loans – A VA loan offers military veterans many advantages over conventional financing. VA loan eligibility is based on the length of continuous active service. This minimum service ranges from 90 days to 24 months, depending on when the veteran served. Peacetime service requires longer times. National Guard and Reservists also have eligibility based on long-term service. Military personnel discharged dishonorably are not eligible. Spouses of veterans killed or missing in action or held as prisoners of war may also be eligible, so long as they haven’t remarried.The Department of Veterans Affairs issues a Certificate of Eligibility (COE). This certificate goes to the lender who will process the loan application and forward it to the VA. A VA appraiser must appraise the property, and the value is outlined in a document known as a Certificate of Reasonable Value (CRV). Once the lender approves the veteran borrower, the U.S. Government guarantees the loan. A VA loan does not require a down payment. The loan amount can be the sales price or appraised value, whichever is less. There is no maximum loan amount, nor are there income restrictions. VA underwriting standards are less stringent than conventional or FHA standards.

For more information on loan programs, it is essential to align yourself with a knowledgable mortgage broker who won’t hesitate to work with you and your clients. Mortgage brokers are usually open to establishing relationships with new agents, so it should be pretty easy to find one who is polite, professional, and works only in the best interest of your clients. If you can’t find one or two you are comfortable working with, just ask around your office for a few referrals.

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OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

Excerpts from articles not originating with Jeff Sorg/OnlineEd are reprinted with permission; remain the sole property of the author; no permission to reprint is given or implied.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

Information in this posting is deemed correct as of the date of publication, but is not guaranteed by the author or may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Top Relocation States During the Pandemic

Florida tops the list of buyer destinations during the pandemic

By Jeff Sorg, OnlineEd Blog

(August 19, 2020)

Stack of moving boxes on a hand truck      (OnlineEd)Hire a Helper, who has been helping people move for over 10 years, has released what they bill as “The Ultimate Collection of US Moving Statistics” on their web site https://www.hireahelper.com/.

The report is a comprehensive hub for every major relocation study in America and includes migration reports, van line reports, and government census data. The report has as its goal to combine, compare, and contrast data across every major moving report to explain where Americans are moving. These are some interesting facts you will find in their report:

  • 9.8% of Americans moved in 2019 – the lowest rate in 70+ years. This moving rate has been steadily declining since reaching a high of 20.2%, way back in 1985.
  • 35 fewer people moved in 2019. At roughly 31.4 million people, that’s 3% fewer than a year ago when 32.3 million Americans relocated, and 16% fewer than 5 years ago in 2015 when 36.3 million people moved.
  • 21.2% moved to a different county within the same state in 2019, the second-highest rate in 30 years.
  • 20% of Millennials moved in 2019, the highest % among all age groups; only 3.5% of people aged 65+ moved last year.
  • 20% of people renting a home moved in 2019; 5% of homeowners moved in 2019.
  • 85% of people moved at least once in the last 5 years; 75% moved once or twice in the previous 5 years; 6% moved once every year; 4% moves multiple times each year.
  • On average, Americans move 11 times in their lifetime.

States People Moved INTO the most 2019 (HireAHelper):

  1. Idaho
  2. New Mexico
  3. Maine
  4. Arizona
  5. South Dakota
  6. Iowa
  7. Mississippi
  8. Nevada
  9. North Carolina
  10. Vermont

Where Do Americans Who Leave Their State Go? (Source: US Census Bureau)

  1. Florida
  2. Texas
  3. California
  4. North Carolina
  5. Georgia
  6. Virginia
  7. New York
  8. Pennsylvania
  9. Washington
  10. Illinois

 

This comprehensive report is chock full of useful information, including % of people who moved by demographics, reasons for moving, highest traffic of inbound and outbound moves, state-by-state, and top city by net moves in each state to name a few. You can get your copy of the complete report at https://www.hireahelper.com/moving-statistics/.

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OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

Excerpts from articles not originating with Jeff Sorg/OnlineEd are reprinted with permission; remain the sole property of the author; no permission to reprint is given or implied.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

Information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

COVID-19 Mortgage Relief, Scams, Online Banking Tips, and Student Loan Relief

CFPB offers tips and videos to alert the public about how mortgage forbearance works and financial information for those impacted by the COVID-19 Pandemic 

By Jeff Sorg, OnlineEd Blog

(April 3, 2020)

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (Bureau) has released a video on how struggling homeowners can obtain mortgage forbearance if their finances are impacted due to the COVID-19 pandemic, student loan relief, scams to watch out for, and online and mobile banking tips.

Below are the resources for consumers:

VIDEO: CARES Act Mortgage Forbearance: What You Need to Know

Guide to coronavirus mortgage relief options

What you need to know about student loans and the coronavirus pandemic

Beware of scams related to the coronavirus

Online and mobile banking tips for beginners

 

[Source: CFPB press release]

 

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OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

Excerpts from articles not originating with Jeff Sorg/OnlineEd are reprinted with permission; remain the sole property of the author; no permission to reprint is given or implied.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

Information in this posting is assumed correct when published but is not guaranteed if obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Real Estate Pre-License Study Video: Understanding the Escrow Process

Questions and answers about a real estate escrow

By Jeff Sorg, OnlineEd Blog

(August 27, 2019)

(PORTLAND, Ore.) OnlineEd – What is escrow? Why is escrow important for real estate transactions? Who opens the escrow? When is escrow closed? Find out the answers to these and other questions by watching this informative study video designed to be used with our Real Estate Pre-License course.

 

Video (C) Copyright; OnlineEd 2019. All Rights Reserved.

No right to reproduce in whole or in part is given.

 

 

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OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

Excerpts from articles not originating with Jeff Sorg/OnlineEd are reprinted with permission; remain the sole property of the author; no permission to reprint is given or implied.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

Information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

FHA Issues Rule to Include Approval of Individual Units in Non-Approved Condo Projects

FHA responds to the market

By Jeff Sorg, OnlineEd Blog

(August 22, 2019)

To promote homeownership, especially among credit-worthy first-time buyers, the Federal Housing Administration (FHA) published its long-awaited final regulation, and policy implementation guidance, which establish a new condominium approval process. That provides for comprehensive revision to FHA condominium project approval policy. The new policy will allow specific individual condominium units to be eligible for FHA mortgage insurance even if the condominium project is not FHA approved. The polices become effective on October 15, 2019.

FHA’s new rule introduces a new single-unit approval process to make it easier for individual condominium units to be eligible for FHA-insured financing; extends the recertification requirement for approved condominium projects from two to three years; allows more mixed-use projects to be eligible for FHA insurance.

“Condominiums have increasingly become a source of affordable, sustainable homeownership for many families and it’s critical that FHA be there to help them,” said U.S. Housing and Urban Development Secretary Ben Carson. “Today, we take an important step to open more doors to homeownership for younger, first-time American buyers as well as seniors hoping to age-in-place.”

HUD Acting Deputy Secretary and FHA Commissioner Brian Montgomery added, “Today we are making certain FHA responds to what the market is telling us. This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium.”

The vast majority (84 percent) of FHA-insured condo buyers have never owned a home before. While there are more than 150,000 condominium projects in the U.S., only 6.5 percent are approved to participate in FHA’s mortgage insurance programs.  As a result of FHA’s new policy, it is estimated that 20,000 to 60,000 condominium units could become eligible for FHA-insured financing annually.

Read FHA’s new condominium approval regulation.

 

 

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OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

Excerpts from articles not originating with Jeff Sorg/OnlineEd are reprinted with permission; remain the sole property of the author; no permission to reprint is given or implied.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

Information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Home Value Appreciation Has Slowed Each Month This Year

Annual home value appreciation decreased for the seventh straight month in July

By Jeff Sorg, OnlineEd Blog

(August 16, 2019)

SEATTLE, Aug. 16, 2019 /PRNewswire/ — U.S. home value growth continues to slow, according to the July Zillow® Real Estate Market Reporti. The typical U.S. home is worth $229,000, up 5.2% from a year ago – this is the smallest annual appreciation since October 2015. Last year at this time, home values rose 7.7% year-over-year. Still, home values are up 0.3% month-over-month, an indication that values are stabilizing after a period of relatively extreme growth rather than headed for a sustained downturn.

Among the 50 largest U.S. markets, home values have grown the most in Salt Lake City (up 9.4% since July 2018), Indianapolis (up 8.1%) and Charlotte (up 7.3%), although growth is slowing in each of these metros. Only New Orleans, Birmingham and Oklahoma City saw home values appreciate at a greater rate than a year ago.

Home values have fallen year-over-year in California’s San Francisco Bay Area, home to the two most expensive markets in the country. The value of the typical home fell 10.5% in San Jose and 1.1% in San Francisco. A year ago, home values were growing 24% annually in San Jose, a 34.5 percentage point difference.

“As talk builds of a potential recession in the next year or two, housing remains fairly stalwart,” said Zillow Director of Economic Research Skylar Olsen. “The slowing appreciation is ultimately a good sign that the market is adjusting in response to the growing unaffordability of down payments, while low mortgage rates are keeping those with the required savings interested despite softer growth out the gate. The uptick in the rate of homes coming onto the market – a good and true increase in supply – should be a boon to those inventory-starved home buyers still searching near the close of home shopping season. While buyers are catching a break, renters have seen prices continue their steady upward climb, presenting yet another obstacle in the quest to save for that down payment.”

The median U.S. rent rose 1.9% year-over-year to $1,592ii. For the eighth consecutive month, rents rose the most in Phoenix (up 6.1% from a year ago), followed by Las Vegas (up 5.9%). Rents fell in only three of the 50 largest markets – Houston, Buffalo and Baltimore.

Inventory grew 1.3% annually, reversing four straight months of declines. There are 19,978 more homes for sale than this time last year. New listings drove the inventory growth in July, up 5.7% from a year ago.

Mortgage rates listed on Zillow fell lower in July. Rates ended the month at 3.72%, down 23 basis points from July 1. Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site and reflect the most recent changes in the market.

Metropolitan Area Zillow Home Value Index, July 2019 ZHVI Year-over-Year Change, July 2019 ZHVI Year-over-Year Change, July 2018 Zillow Rent Index, July 2019 ZRI Year-over-Year Change, July 2019 Inventory Year-over-Year Change, July 2019
United States $229,000 5.2% 7.7% $1,592 1.9% 1.3%
New York, NY $442,800 3.2% 5.5% $2,279 2.3% 4.8%
Los Angeles-Long Beach-Anaheim, CA $650,600 0.9% 6.3% $2,599 1.3% 11.3%
Chicago, IL $225,200 2.1% 5.3% $1,615 1.3% 6.9%
Dallas-Fort Worth, TX $243,500 5.1% 11.8% $1,439 1.5% 12.3%
Philadelphia, PA $233,300 2.1% 5.3% $1,497 2.5% -4.8%
Houston, TX $206,400 3.4% 6.1% $1,378 -0.5% 5.5%
Washington, DC $407,700 2.1% 3.8% $1,971 2.0% -8.8%
Miami-Fort Lauderdale, FL $284,300 3.2% 8.2% $1,851 2.2% 3.8%
Atlanta, GA $220,300 6.9% 11.8% $1,454 4.1% 8.3%
Boston, MA $463,300 1.9% 6.2% $2,416 2.2% 8.4%
San Francisco, CA $938,100 -1.1% 9.4% $3,166 1.2% 21.5%
Detroit, MI $162,900 4.6% 9.4% $1,211 2.3% 17.4%
Riverside, CA $371,500 3.3% 7.3% $1,907 4.3% -1.6%
Phoenix, AZ $267,500 4.5% 7.7% $1,401 6.1% -2.9%
Seattle, WA $489,500 0.5% 8.7% $2,036 2.4% 14.3%
Minneapolis-St Paul, MN $272,000 4.3% 6.6% $1,494 0.6% 4.9%
San Diego, CA $591,500 1.1% 6.1% $2,519 3.1% 6.0%
St. Louis, MO $167,700 3.5% 5.5% $1,009 1.3% -15.0%
Tampa, FL $216,400 5.0% 10.6% $1,392 3.7% 2.8%
Baltimore, MD $267,100 0.7% 4.9% $1,605 -0.1% -4.0%
Denver, CO $409,200 3.0% 6.7% $1,781 1.5% 26.9%
Pittsburgh, PA $144,700 2.5% 7.3% $1,102 1.8% -15.0%
Portland, OR $396,700 1.5% 5.3% $1,647 0.7% 3.1%
Charlotte, NC $210,600 7.3% 10.2% $1,322 3.5% 6.2%
Sacramento, CA $411,300 2.7% 5.4% $1,788 3.5% 0.8%
San Antonio, TX $195,600 5.0% 5.7% $1,215 0.3% 17.9%
Orlando, FL $240,000 5.1% 9.4% $1,414 3.5% 4.5%
Cincinnati, OH $170,400 5.4% 6.3% $1,145 3.2% -8.3%
Cleveland, OH $147,100 4.2% 6.6% $1,071 4.1% -1.3%
Kansas City, MO $191,900 4.7% 9.5% $1,121 1.0% N/A
Las Vegas, NV $279,100 5.1% 13.6% $1,329 5.9% 53.5%
Columbus, OH $193,800 6.5% 7.9% $1,183 0.6% -3.3%
Indianapolis, IN $167,300 8.1% 9.6% $1,100 1.0% N/A
San Jose, CA $1,144,800 -10.5% 24.0% $3,338 0.5% 32.6%
Austin, TX $312,300 4.7% 6.2% $1,586 2.1% -4.9%
Virginia Beach, VA $229,800 1.5% 2.8% $1,335 1.1% -9.6%
Nashville, TN $255,700 4.0% 9.8% $1,445 1.3% 14.6%
Providence, RI $295,100 3.4% 7.3% $1,427 3.2% -3.7%
Milwaukee, WI $232,500 4.5% 5.2% $1,094 2.5% 15.3%
Jacksonville, FL $214,400 5.5% 10.5% $1,348 3.9% -2.1%
Memphis, TN $141,000 5.1% 8.3% $1,047 4.2% -10.6%
Oklahoma City, OK $148,400 4.0% 2.9% $937 1.8% -11.5%
Louisville-Jefferson County, KY $164,400 5.5% 5.7% $1,087 1.4% -1.2%
Hartford, CT $229,100 0.2% 2.5% $1,334 1.1% -4.4%
Richmond, VA $232,000 4.0% 5.3% $1,323 1.3% N/A
New Orleans, LA $176,000 2.7% 0.0% $1,274 0.5% 0.4%
Buffalo, NY $161,400 4.4% 6.7% $1,015 -0.3% -1.2%
Raleigh, NC $269,100 5.2% 5.6% $1,286 1.0% 0.6%
Birmingham, AL $148,700 6.9% 5.5% $1,058 2.3% -5.9%
Salt Lake City, UT $373,200 9.4% 11.3% $1,494 1.7% 20.3%

 

[Source: Zillow press release]

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OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

Excerpts from articles not originating with Jeff Sorg/OnlineEd are reprinted with permission; remain the sole property of the author; no permission to reprint is given or implied.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

Information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Why Oregon Realtors® Have No Business Being Involved in FIRPTA

” . . . this should be in the form of a joint seller/buyer instruction to escrow; let them do the job they are paid to do.”

By Jeff Sorg, OnlineEd Blog

(August 14, 2019)

(PORTLAND, Ore.) Jeff Sorg – The disposition of a U.S. real property interest by a foreign person is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests.

In most cases, the buyer is the withholding agent. This means the buyer must find out if the seller is a foreign person. If a seller is a foreign person and the buyer fails to withhold, the buyer may be held liable for the tax. Additionally, according to an article from CRES Insurance, if the broker involved knows the seller’s citizenship or residency status or knows the seller misrepresented their status and fails to disclose it, offers to investigate the seller’s status and fails to discover the truth, or fails to advise the buyer of the withholding obligation, then the broker can face liability.

So, what’s the broker to do? Here’s how Phil Querin, Querin Law, LLC, answers this question in his article, Why Oregon Realtors® Should Get Out Of The FIRPTA Business, recently published in Managing Broker Monthly: “Oregon Realtors® have no business doing something escrow should be doing when a real estate transaction is first opened: Immediately get the Certificate of Non-Foreign Status signed by the seller. And at the time of closing, it [escrow] should provide a declaration to the buyer that it is holding that document and will do so for the required period of time. How difficult is that? Realtors® should not want their fingerprints on the Certificate. And to be absolutely safe, this should be in the form of a joint seller/buyer instruction to escrow; let them do the job they are paid to do.”

Querin goes on to say, “In short, Oregon title/escrow companies are the obvious entities to serve as Qualified Substitutes. And if truth be told, many – if not all of them – have required sellers to sign a Certificate for every transaction they close, regardless of whether they are “foreign persons”. What they haven’t been doing, at least until now, is “formally” acting as the Qualified Substitute, and providing every buyer with a declaration that they are holding the seller’s Certificate and will do so for the next five years.” [Read Querin’s entire article]

A withholding obligation is generally imposed on the buyer or other transferees (withholding agent) when a U.S. real property interest is acquired from a foreign person. The withholding obligation also applies to foreign and domestic corporations, qualified investment entities, and the fiduciary of certain trusts and estates. To avoid liability, real estate brokers should not offer to investigate the seller’s status and should always be sure to advise their clients of this withholding obligation.  Finally, the brokers involved should make sure the escrow company handling their transactions agrees to act as a Qualified Substitute and to keep all necessary records for the required period. In your selected escrow company won’t act as a Qualified Substitute, then find another escrow company.

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OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

Excerpts from articles not originating with Jeff Sorg are reprinted with permission; remain the sole property of the author; no permission to reprint is given or implied.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

Information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Categories: Real Estate

Report for Residential Construction Activity in June 2019

Building permits, housing starts, and housing completions report

By Jeff Sorg, OnlineEd Blog

(July 17, 2019)

(Wahington) US Dept. of HUD (c) Can Stock Photo– The U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau jointly announced the following new residential construction statistics for June 2019.

Building Permits

Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,220,000. This is 6.1 percent (±1.2 percent) below the revised May rate of 1,299,000 and is 6.6 percent (±1.1 percent) below the June 2018 rate of 1,306,000. Single‐family authorizations in June were at a rate of 813,000; this is 0.4 percent (±1.0 percent)* above the revised May figure of 810,000. Authorizations of units in buildings with five units or more were at a rate of 360,000 in June.

Housing Starts

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,253,000. This is 0.9 percent (±7.9 percent)* below the revised May estimate of 1,265,000, but is 6.2 percent (±7.8 percent)* above the June 2018 rate of 1,180,000. Single‐family housing starts in June were at a rate of 847,000; this is 3.5 percent (±9.6 percent)* above the revised May figure of 818,000. The June rate for units in buildings with five units or more was 396,000.

Housing Completions

Privately‐owned housing completions in June were at a seasonally adjusted annual rate of 1,161,000. This is 4.8 percent (±12.8 percent)* below the revised May estimate of 1,220,000 and is 3.7 percent (±10.5 percent)* below the June 2018 rate of 1,205,000. Single‐family housing completions in June were at a rate of 870,000; this is 1.8 percent (±11.5 percent)* below the revised May rate of 886,000. The June rate for units in buildings with five units or more was 283,000.

 

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OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

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Starting Today, Portland Home Sellers Can Request a Cash Offer From Zillow

Zillow Now Buying and Selling Homes in Portland

By Jeff Sorg, OnlineEd Blog

(July 15, 2019)

(PORTLAND, Ore.) July 15, 2019 /PRNewswire/ — Starting today, home sellers in the Portland, Oregon metro — including Vancouver, Wash. — can use Zillow Offers to request a cash offer from Zillow to buy their home.

Portland is the twelfth market where Zillow now directly buys homes – giving homeowners a new way to sell their homes that is convenient, transparent and gives them more control over the entire real estate transaction.

“Sellers across the country have shown that they are looking for an easier, less stressful way to sell their home,” said Zillow Brand President Jeremy Wacksman. “We’re excited to launch our first market in the Pacific Northwest today, giving potential home sellers in Portland and Vancouver the certainty and transparency they want when selling their home. Zillow Offers provides a seamless transaction experience, helping sellers move on to the next step in their life.”

Selling a home is one of the most stressful experiences in modern life, second only to a relationship break-up1. Decluttering and readying their home for tours and open houses are often the most frustrating tasks for sellers, according to Zillow research. In fact, according to a recent Zillow survey, more than a third of home sellers said the process left them in tears, with millennials and parents far more likely to cry at some point during the sale process.

Zillow Offers is transforming the way people sell their homes across the country. With Zillow Offers, sellers don’t need to worry about prepping their home for sale or hosting open houses — avoiding much of the hassle and time and energy associated with a traditional sale.

Designed to accommodate all types of sellers, Zillow Offers can work for anyone, whether they need to close quickly for a job move across the country or they want to close on a longer timeline to search for their dream home. Zillow Offers gives sellers the flexibility to choose their close date within just a few days or up to 90 days after accepting their offer.

Additionally, consumers using Zillow Offers – whether they are selling to or buying from Zillow – can experience an even simpler real estate transaction if they decide to get financing from Zillow’s affiliate lender, Zillow Home Loans to purchase their next home. Homeowners using Zillow Offers to sell their home can apply to get pre-approved for a mortgage through Zillow Home Loans, giving them the certainty to be able to sell their existing home and shop for a new home simultaneously.

Buyers who purchase a Zillow-owned home have the confidence of moving into a home that’s been professionally renovated, refreshed and is move-in ready.

Zillow Offers first launched in Phoenix last April and is currently available for home sellers in Las Vegas, Atlanta, Denver, Charlotte, Raleigh, Houston, Riverside, Dallas, Minneapolis and Orlando. Zillow also has plans to launch in Austin, Los Angeles, Miami, Nashville, Sacramento, San Antonio, San Diego and Tampa, by the end of the first quarter of 2020, bringing the total number of planned Zillow Offers markets to at least 20.

In each market where Zillow Offers is currently available, Zillow works with local agents and brokers on every transaction. Zillow pays a commission to local real estate agents when it buys and sells a home, and agents remain at the center of every Zillow Offers transaction. A local Portland broker will represent Zillow in each transaction.

The Zillow Offers program also provides local brokerages and Premier Agents the opportunity to acquire new for-sale listings by connecting them with motivated sellers who have taken a direct action to sell their home. Sellers who request a Zillow Offer, but decide to instead sell their house traditionally with an agent or do not receive a Zillow Offer, may be connected with a local brokerage or Zillow Premier Agent to support their needs.

As of May, more than 100,000 homeowners across the country have requested a no-obligation cash offer from Zillow to buy their home – equal to a request for an offer every two minutes.

[Source: Zillow press release]

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Zillow and Zillow Offers are registered trademarks of Zillow, Inc.

OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark

Oregon Real Estate Transaction Law for Domestic Well Water Testing

“The seller of the real estate shall, upon accepting an offer to purchase that real estate, have the well tested.”

By Jeff Sorg, OnlineEd Blog

(June 28, 2019)

(PORTLAND, Ore.) OnlineEd – Oregon requires testing of domestic well water during a real estate transaction. This requirement is often referred to as the Real Estate Transaction Law or RET. The law says:

“In any transaction for the sale or exchange of real estate that includes a well that supplies groundwater for domestic purposes, the seller of the real estate shall, upon accepting an offer to purchase that real estate, have the well tested for arsenic, nitrates and total coliform bacteria. The Oregon Health Authority also may, by rule, require additional tests for specific contaminants in specific areas of public health concern.  The seller shall submit the results of the tests required under this section to the authority and to the buyer within 90 days of receiving the results of the tests.”

In Oregon, the seller is responsible for testing domestic well water but can designate their attorney, real estate broker, the laboratory person conducting the water testing, or a private party to assist them with water testing and reporting requirements. The seller must notify the potential buyer of the testing results within 90 days. While the lab tests required cannot be waived even if the buyer agrees not to have the well tested, if the seller fails to comply with the rule, then this does not invalidate any of the documents needed to complete the sale of the real estate.

Samples must be drawn from the source before any form of water treatment and may be collected after treatment injection points where water treatment has been bypassed or disabled. Registered Sanitarians, certified water system operators, well drillers, pump installers, and lab technicians are qualified to collect samples for testing by accredited laboratories. Only laboratories accredited by the Oregon Environmental Laboratory Accreditation Program can conduct water tests.

If the well is not on the property being sold, but the seller is selling an interest to a well on adjacent property, including an easement, that interest would be considered part of the real property. Capped domestic wells on unimproved lots are NOT required to be tested, but wells that are dug, drilled or driven and supply groundwater for domestic purposes must be tested.

For more information on domestic well safety and sample collection, visit the Oregon Health Authority, Oregon Drinking Water Services.

Oregon rules for testing domestic wells are found in OAR 333-015-0305 through 333-015-0335.

 

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OnlineEd blog postings are the opinion of the author and not intended as legal or other professional advice. Be sure to consult the appropriate party when professional advice is needed.

For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of the date of publication, but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd® is a registered Trademark