VARbuzz » Jim Duncan

“New Normal” = “Normal” in the Real Estate Market

Jim Duncan — Mon, 30 Jan 2012 21:09:28 +0000

“Normal” is “now”.

Human settlement patterns (where people are living and working)
Gas prices
Expectation of permanence/transience
Interest rates
Property tax rates
Monetary supply
The internet’s availability and impact

Those are just a few of the ways that 1999 differs from 2011, and makes application of “normal” challenging.

Here’s something that hasn’t changed – people need homes. Buying a house is a choice, and one that comes with greater responsibility than renting – you’re accepting on the maintenance, the permanence, the mortgage, the community, the risk. If you’re not ready for those, don’t buy a house. If you’re ready to buy a home, do your due diligence and consider it.

Guest post by VAR member and Charlottesville Realtor® Jim Duncan. Originally posted at the Charlottesville real estate blog, RealCentralVA.com.

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Making Sense of Trulia’s Entry to the Home Valuation Market

Jim Duncan — Thu, 08 Sep 2011 14:56:48 +0000

With one more entry into the (automated) home valuation arena, how does one make sense of all the methods of valuing a home in this market?

There are at least six methods of home valuation out there right now; I know that my customers and clients are going to use the ones that they find; my challenge in advising them is to put these valuations in context and either demonstrate their respective accuracies or most likely, prove just how wrong they are. And why.

- Trulia’s Estimates – (automated) – “Trulia has jumped into the home value game.” Now that they’re here, so what? While the Trulia Estimates are only in San Francisco right now, presumably they’ll be making their way nation-wide.

After years of watching competitors’ failures and successes in providing automated home values to consumers, Trulia is now launching Trulia Estimates into open beta, claiming consumer demand drove them to add this feature. After quietly tweaking the site to make way for the Trulia Estimates (like changing the location and size of the large map for search results), the company is now offering home value estimates in the San Francisco Bay area which just happens to be their back yard.

Over one million off-market addresses are now available for public viewing in the city. Trulia Estimates pulls only from public record data rather than a third party source and the site allows homeowners to claim their home and update features which ultimately will have an impact on the Trulia Estimate for that address in real time, Trulia told AGBeat.

- Zillow’s Zestimates – (automated) – Most people know about these and recognize that (at least in Charlottesville) zestimates just aren’t accurate.

- Realtor.com – (automated) – offers valuations, but you have to register first. And likely be contacted by a local Realtor. And there’s no way to request the information via your Realtor. (that I can see)

- The National Association of Realtors’ Realtor Property Resource (RPR) – (automated) – - used only by Realtors; its Automated Valuations are improving; presumably as more Realtors who use this potentially valuable tool, its AVMS will improve.

- County/City Assessments – (human) This is the value tax assessors use, no more, no less. These values look backwards rather than forwards and as such (IMHO) do not necessarily correlate to market value.

- Appraised Values – (human) the value determined by an appraiser (most often hired by the bank). This is often fairly accurate, but often is not due to the shifting market, competencies of the various appraisers and where the appraiser is coming from (non-local appraisers generally don’t provide very accurate appraisals; they don’t know our market)

- Fannie/Freddie Appraisal banks -

… Fannie Mae and Freddie Mac began collecting appraisal information for any property for which they own the mortgage. Because F&F buy more than 90% of the mortgages on the market, the Uniform Appraisal Dataset will essentially become a nationwide database of property appraisals.

- Market Value – (human) as determined by a ready, willing and able buyer and a ready, willing and able (non-distressed) seller in an arms-length transaction. This can be the toughest, mainly because it’s emotional, fluid, made with often-sparse data and has a variable the others don’t really have – people.

Right now? Pricing a home in any market can be an impossible task that rattles and confounds experts who possess most of the appropriate and relevant human intelligence; I don’t see yet how AVMs are going to be any better.

Prime example: I called my mortgage holder and their automated valuation for my home was 20% higher than its likely true market value.

When evaluating all of the metrics out there my conclusion is this: All AVMs suck. But one day, they might not suck so bad.

Jim Duncan is a Charlottesville REALTOR® and guest author on VARbuzz.

Originally posted at Jim Duncan’s real estate blog in Charlottesville, Virginia.

Read the HOA docs — they matter

Jim Duncan — Thu, 28 Jul 2011 14:27:24 +0000

Finding conversion between two distant stories with one major point:

Lesson #1: Read the HOA docs and any neighborhood covenants and restrictions before you buy a home.

Lesson #2: An awful lot could be solved and avoided if people would just talk to each other.

Lesson #3: Homeowners’ Associations can be overly restrictive; if you don’t like it either don’t buy there or buy and get involved to change the rules.

From a Charlottesville-area neighborhood’s covenants and restrictions: (emphasis mine)

Article VII, Section 4. Signs. Except as may be required by legal authority or proceedings, no sign shall be erected or maintained on any Property by anyone including, but not limited to, an owner, a tenant, a realtor, a contractor, or a subcontractor, until the proposed sign, size, color, content, number of signs, and location of sign shall have been approved in writing by the Company. Refusal or approval of size, color, content, number of signs, or location of sign(s) may be based by the Company upon any ground, including purely aesthetic considerations, which in the sole and uncontrolled discretion of the Company seems sufficient. The Company further reserves the right to promulgate and amend from time to time uniform sign regulations which shall establish standard design criteria for signs, including but not limited to, real estate sales signs, erected upon any Property in (this neighborhood) . Company reserves the right to prohibit various classes of signs.

The Company and its agent shall have the right, whenever there shall have been placed or constructed on any Property in (this neighborhood) any sign which is in violation of these restrictions, to enter immediately upon such Property where such violation exists and summarily remove the same at the expense of the Property Owner.

A family in Louisiana is being sued by their HOA for not taking down a sign honoring their son’s service in our military:

The Gardens of Southgate filed the suit this month against Timothy and Jodi Burr, a Bossier City couple who have lived within the subdivision since 2006. The Burrs placed a large multi-colored banner with a picture of their 20-year-old son, Marine Corps Lance Cpl. Corey Burr, and the phrase “Our son defends our freedom” in January after Corey Burr was deployed to Afghanistan.

Note that Virginia Code grants the Purchaser three days to review HOA disclosures and terminate the Contract for any reason whatsoever – carte blanche to cancel.

A. Subject to the provisions of subsection A of § 55-509.10, a person selling a lot shall disclose in the contract that (i) the lot is located within a development that is subject to the Virginia Property Owners’ Association Act (§ 55-508 et seq.); (ii) the Act requires the seller to obtain from the property owners’ association an association disclosure packet and provide it to the purchaser; (iii) the purchaser may cancel the contract within three days after receiving the association disclosure packet or being notified that the association disclosure packet will not be available; (iv) if the purchaser has received the association disclosure packet, the purchaser has a right to request an update of such disclosure packet in accordance with subsection H of § 55-509.6 or subsection C of § 55-509.7, as appropriate; and (v) the right to receive the association disclosure packet and the right to cancel the contract are waived conclusively if not exercised before settlement.

Lesson #2 from the above-mentioned story: an awful lot could be solved and avoided if people would just talk to each other.

The Burrs responded initially by requesting a meeting with the association to discuss the issue. Burr said they never got a response about when it could take place. And instead, she received a visit from a HOA representative who wanted to discuss the violation and again request the sign be removed.

I have a feeling that next year’s presidential election (it sure does feel like it’s this year, doesn’t it?) is going to lead to a lot of political signs in neighborhoods and that there may be some conflicts – in this particular neighborhood and elsewhere.

Originally posted at RealCentralVA, Charlottesville’s real estate blog.

Pre-Offer Home Inspections – Are you Seeing Them Too?

Jim Duncan — Tue, 12 Apr 2011 18:30:27 +0000

Every real estate market is different; this one has brought more pre-offer inspections than I have ever seen (in part because I’m more comfortable suggesting them to my buyer clients).

1 – Allows for an As-Is Sale

2 – Removes one phase of negotiations from the process.

3 – Allows for fewer emotions clogging the negotiating process. The home inspection negotiation is often the most emotional, vindictive, painful, and difficult part of the negotiation; a pre-offer inspection removes this element.

4 – It’s cleaner, procedurally.

Risks:

- Even in this market, homes are selling; some are selling with multiple offers and buyers can lose properties if they opt for the pre-offer inspection path

- Some sellers don’t want to allow these; they want assurances that a buyer is really committed before allowing a home inspection.

As with every question and answer in real estate, whether a pre-offer inspection is right for you is dependent on the situation. One must evaluate all factors involved, some of which are the buyers, the sellers, the buyers’ agent, the sellers’ agent, the respective companies, the days on market, market activity to name a few …

Originally posted at RealCentralVA.com.

The skinny on VAR’s agency legislation

Jim Duncan — Tue, 08 Feb 2011 16:19:18 +0000

If you haven’t read the VAR-sponsored agency bill (HB 1907) that is currently winding its way through the General Assembly sausage-making facility, you probably should. The edits and changes will, in some cases, fundamentally affect how agency is practiced in Virginia and in others, make Realtors’ and real estate licensees’ professional lives a bit more efficient.

While the bill is primarily about clarifications to real estate agency representation laws, it also includes a number of other provisions that just happen to be located in the same Virginia Code section as the agency statute.

Regarding Agency in Virginia:

All brokerage agreements in writing:

This is a simple and straight-forward change that serves to clarify to all parties and educate consumers about what type of professional relationship and agreement to which they are entering. Some of the simple clarifications that should be common sense to most of us:

- specifies a termination date
- states the fees
- “services to be rendered by the licensee”

Enhanced required disclosure verbiage before commencement of disclosed dual STANDARD agency

Single Agent Dual Agency, whereby the same licensee “represents” both sides has long been recognized as being both risky to the agent, risky and potentially damaging to the consumer and is illegal in many states. This section does not make dual agency illegal, but serves to inform the consumer as to the inherent limitations incurred when one chooses to enter a single agent dual agency relationship.

Prior to entering a single agent dual agency relationship, the following enhanced disclosure must be made in writing:

The disclosure shall contain the following provisions:

1. That following the commencement of dual standard agency, the licensee will be unable to advise either party as to the terms, offers or counteroffers; however, under the limited circumstances specified in subsection C, the licensee may have previously discussed such terms with one party prior to the commencement of dual standard agency;

2. That the licensee cannot advise a buyer client as to the suitability of the property, its condition (other than to make any disclosures as required by law of any licensee representing a seller), and cannot advise either party as to repairs of the property to make or request;

3. That the licensee cannot advise either party in any dispute that might later arise relating to the transaction;

4. That the licensee will be acting without knowledge of the client?s needs, client?s experience in the market, or client?s experience in handling real estate transactions unless he has gained that information from earlier contact with the client under the limited circumstances specified in subsection C; and

5. That either party may engage another licensee if he requires additional representation.

Bluntly, in a single agent dual agency situation, an agent cannot give 100% to either party in the transaction. This merely specifies some of the ways that a dual agent is limited.

One of the challenges when crafting this language was, “what about clients whom I have represented for years and want to buy one of my listings?”

Hence, the exemption for “standard agency for existing clients.”

Note that the enhanced disclosures clearly apply ONLY to standard agency in RESIDENTIAL transactions. As we all know, commercial real estate is an entirely different ballgame.

Goodbye, Tracks

At the request of the Real Estate Board, the bill does away with the old track system for post-license (residential track, commercial track, property management track, etc). This system was neither efficiently used or successful in accomplishing what it had been designed to address. To the Board’s and VAR’s credit, they recognized this and have moved to eliminate it.

Pertinent and relevant education for real estate licensees.

Allows the Real Estate Board annually (if it wishes) to readjust the required CE course topics to reflect current market trends, practices, challenges, etc. This is an important change that will hopefully allow the education to be relevant and helpful to our respective practices, rather than serving as a necessary evil that must be endured.

Square footage from public sources:

This alteration relieves a licensee of liability if they provide buyer information that proves to be false but comes from the seller, a government entity (such as tax records, GIS, etc), or other licensed or certified provider of professional services services. This does not relieve the licensee of the obligation to inform customers and clients of the fact that the Commonwealth is a Caveat Emptor state and that they should double-check every piece of information themselves.

Disclosures: Paper & Liability saving measure:

This authorizes the Real Estate Board to create a website containing property disclosures and create a single form for licensees to us to direct buyers to the disclosure site. In short, instead of having to have clients sign new Disclosures each time they are changed (seemingly every six months) licensees will be able to direct buyers to a website.

No more worrying about whether the Dislosure form you had signed is obsolete in August because the new one was was implemented on 1 July. Now, “The Disclosure” will always be current.

Summary

All licensees should read this bill and the relevant Code (of Virginia, not Ethics). It matters. The Agency changes are the results of many months of service from our members on committees and countless hours of staff’s tireless efforts. Let’s hope all licensees read, understand and abide by the changes.

No One is Safe

Jim Duncan — Sun, 18 Jan 2009 15:16:47 +0000

The General Assembly is in session. If you’re not paying attention, you really should be. The best tool I’ve found to keep up is Richmond Sunlight. Educate yourself (start at the blog).

*as of Sunday, 18 January at 10am

There are 14 bills tagged with “real estate” and 349 with “real estate” in the titles, summaries or texts.

Think this bill might affect you and your business? – Notice for setting local real property tax rate. (SB1131)

Notice for setting local real property tax rate. Reduces from 30 days to 10 days the public notice required by localities under certain circumstances for increasing the local real property tax rate above the rate that would generate 101 percent of the prior year’s real property tax revenues.

Or this one? -Real Estate Board; compensation to referring attorneys prohibited, exception. (HB2040)

Real Estate Board; compensation to referring attorneys prohibited; exception. Provides that an attorney-at-law referring a client to a licensee shall not receive any compensation from a listing firm or offered in the common source information company to cooperating brokers, unless the attorney is also licensed as a real estate broker or salesperson. The bill contains technical amendments.

198 bills have the word “assessment” in the title or description.

Surely, they wouldn’t pass this bill – Use value assessment; roll-back taxes. (SB1043) :

Use value assessment; roll-back taxes. Allows counties, cities, and towns to assess and collect roll-back taxes for up to 15 years under a use value assessment program if all roll-back taxes, interest, and penalty are promptly deposited into a special fund and used to fund the locality’s purchase of development rights program.

What??? Department of Professional and Occupational Regulation; Virginia Real Estate Board; waiver of broker (SB1210)

Department of Professional and Occupational Regulation; Virginia Real Estate Board; waiver of broker education requirements. Requires the Virginia Real Estate Board to waive the broker education requirement for any applicant for a brokers license who has owned a real estate brokerage firm for more than 15 years and during that time and maintained an active license as a real estate salesperson.

Think they’ll ban smoking in restaurants?

Here’s my question – or challenge – what are your “favorite” bills?

Get Ready for the Upcoming General Assembly Session

Jim Duncan — Tue, 02 Dec 2008 17:15:26 +0000

If you enjoyed GovTrack.us, featured in an earlier VARbuzz post about tracking national politics, you’ll also like the Virginia version, Richmond Sunlight. During the 2009 General Assembly Session, there will be much discussion on real estate, transportation, property taxes, grantors tax, recordation tax – all of which directly impact how we as REALTORS do business.

Heck, Richmond Sunlight even allows you to track the most recently introduced bills.

Let those of us on the Public Policy Advocacy Group know what you’d like VAR to attack or defend.

If you want to take a snarky approach, see how many bills commending various people are introduced, and wonder how much each of these cost us, the taxpayers.

As seen on Twitter -

I’ll have a more in-depth post as the Session nears, but wanted to get this on your radar and in your consciousness.

Time to Look Again at Agency in Virginia

Jim Duncan — Tue, 21 Oct 2008 13:00:03 +0000

It is incumbent upon us, as the keepers and practitioners of the industry, to constantly evaluate ourselves and our profession. The time has come to re-evaluate Agency as we know it.

We had a great discussion here in March - Part One and Part Two and an eloquent defense (albeit flawed in my humble opinion) of Single Agent Dual Agency by Candy Lynn.

VAR looked at Agency from 1992 until 1994 and the law went into effect on July 1 1995.

A lot has changed since our Association last looked at Agency (for starters, the Internet has redefined our world).

The time has come to re-examine the state of Agency.

Matthew Rathbun brought up the Agency Conversation again at AgentGenius recently -

“Realizing that cooperation with other real estate professionals promotes the best interests of those who utilize their services, REALTORS® urge exclusive representation of clients; do not attempt to gain any unfair advantage over their competitors; and they refrain from making unsolicited comments about other practitioners.”

~ Paragraph 5 of the Preamble to the REALTOR® Code of Ethics (emphasis mine)

“Don’t forget the problems caused by being a Dual Agent. The difficulties associated with this perfectly legal agency relationship seem to be on the increase. Be very careful to communicate and explain dual agency to prospects and clients and avoid dual representation if at all possible.””

~ Schafer Oglesby, Virginia Real Estate Board Chairman – 2006 Newsletter

“Virginia law merely permits you to engage in it with the informed consent of the parties provided you act accordingly. Their informed consent, once obtained, does not mean the conflict ceases to exist, merely that the clients consent to your acting as a dual agent notwithstanding the existence of the conflict. This is an important point to remember: the conflict does not go away just because you get the requisite consent. You still must act in a manner consistent with the conflicting interests of your clients.”

~ Lem Marshall, VAR Legal Counsel “Commonwealth Magazine 2004″

If you’re an agent practicing Dual Agency and get sued, how long do you think it’ll take an attorney to pull up these documents and the large number of posts warning against Dual Agency? A jury is going to have a hard time understanding why agents still pursue this archaic practice, while everyone is warning against it.

The purpose of writing this post is to reaffirm the need to examine and study at the continued viability of Single Agent Dual Agency and to clarify once again that this is not a call for an end to Designated Agency (whereby one company represents both sides of a transaction) but a request to look at one agent representing both parties. Let us look at the greater good of the industry and profession and the perception of the industry by the consumers whom we are purportedly “representing” rather than a short-sighted look at our pocketbooks.

(Did you know that Dual Agency has been illegal in Colorado since 1 January 1994?)

It would be far better to take the lead in examining this than to be lead by the courts/legislators/regulators, no?

Other than Candy’s argument, I’d love to hear an ethical argument that doesn’t begin or end with, “but I want both sides of the commission!” (if you really want to go this route, who wants to tackle Divorcing the Commissions?)

Update 22 October 2008: If you happen to feel strongly enough about this, please comment below and/or email VAR’s Leadership Team.

The Pace of Politics

Jim Duncan — Tue, 23 Sep 2008 19:30:55 +0000

The VAR Convention is this week, and politics are on my mind. Take a look at the agendas for the upcoming governance meetings and see if there is anything there that will affect your business (of course there is!). One of the more frustrating aspects of Association involvement is the pace of the Realtor political process. The Committees, the Work Groups, the Groups, The Teams … (sometimes, we should slow down a bit).

What is continually frustrating is the pace of the governance process. Change is happening to our industry in many ways, and we as Realtors need to get ahead of the changes. A big part of that is voicing your individual and collective opinions.

If you want change to happen, get involved. The Delegate Body, the Public Policy and Governance meeting, the Policy Board – all seem ethereal – made up of the Realtor Association vapor – until you actually come to a meeting and hear that the discussions focus on very tangible aspects of Realtors’ businesses and lives.

Stop by. Get involved. Let the leaders and committee members know that you are watching, listening and care. Ask questions about the issues – why they (I) voted this way or that way.

The pace may occasionally resemble watching paint dry, but the results are often worth while.

A Cautionary Tale

Jim Duncan — Wed, 09 Jul 2008 11:47:31 +0000

The following is an account of a loan horror story recounted by a Charlottesville lender.

First, a solution:
What Realtors can do to avoid a similar scenario: Work with lenders who have successfully closed at least five loans in the past twelve months of the type they are proposing. Work with lenders who have a reputation for ethical conduct. Choose your lenders based on factors other than glad-handing, happy talk or willingness to buy you lunch.

Take note of last-minute loan blowups and share that information with your business associates and clients. (I know many Realtors already do this when their client is proposing use of an on-line lender about whom the Realtor has already heard horror stories.) There are plenty of good lenders who would be happy to competently handle your deal, and there’s no reason for lenders who blatantly abuse their industry partners and clients to be making money.

What Buyers can do: ask lenders for names of satisfied clients who did the type of loan they are considering. This is perfectly reasonable. Don’t buyers and sellers ask Realtors for testimonials from happy clients? (ed. note: one of my more favorite questions of late is, “tell me about one of your dissatisfied clients, and why they were so dissatisfied”)

We’ve never seen a lender hauled before a panel of their peers on ethics charges (as happens in the Realtor community) though there’s certainly been ample cause. That’s unfortunate, but forewarned is forearmed.
Now, the tale:

Buyer (happens to be first-time but that doesn’t matter) and Seller enter into a contract, after two Realtors spend the usual hours marketing, showing, driving, negotiating and doing paperwork …

Buyer is going to do an FHA loan. They’re so popular now, for good reason. Buyer is hooked up with a lender. Don’t know how they connected, whatever, but if it was his Realtor who referred him to the lender we hope she’s learned a lesson.

The lender is not FHA approved. He’s pretty sure he will be, soon, so he originates the loan. Home inspection, appraisal done and paid for. Commitment letter issued (hearsay, I didn’t see it). Two weeks prior to closing the lender apparently gets worried that this FHA approval isn’t going to come through. It likely never will.

He contacts at least two local FHA lenders and attempts to refer the deal to them. One of them turns it down flat and the other takes the application, runs it through his underwriting system and can’t get an approval.

The lender doesn’t notify the borrower or Realtors at this or any point. Now we get into hearsay, in italics.

Two days prior to closing the lender told the borrower that they didn’t qualify for FHA (they didn’t, but the lender didn’t even have the option. If they’d been an experienced FHA lender they’d have know he didn’t qualify). The rate went from about 6% to 7.75 or higher. Closing costs/payment also went way up.

This is the problem with hearsay but you get the idea. The lender had flipped the loan to FNMA/conventional, got what’s called an expanded approval, which has high rates and high PMI. The payment was at least $200 higher and this was an “affordable” home.

On closing day the listing agent went to the closing table with the sellers expecting to sign. They were at the table when they found out the buyer’s loan wasn’t going to close.

At that point one more FHA-experienced lender was called in and ran the loan through his underwriting system- it wasn’t approved.

The listing agent is out all her marketing time and expense. The seller has lost valuable marketing time and now has a stale listing if they didn’t before. The buyer’s agent is out all the hours spent driving around a client who didn’t qualify, negotiating, doing paperwork etc. The potential buyer is out appraisal fee, cost of home inspection, maybe more, and has given up the lease on his rental unit so doesn’t have a place to live.

Oh, also, the lender didn’t get paid his commission. He put all these people’s time and money on the line in the slim hope that he might get paid. They all got screwed by this industry partner. (Sorry for the salty language.)

This is an easy problem to avoid. There are a lot of lenders out there now who don’t have what it takes to manage the current market. They might not be able to do the loan and not even know it. They might be able to but not know how. I hate to see you guys lose time and money. We are all in the same boat. There are a lot of good lenders who can get deals closed in this lending environment and will tell you if it’s not going to work.

I hope you can make this into a cautionary tale to help your readers- buyers, sellers and Realtors. Let me know if you have questions or need a referral to the other lenders or Realtors involved. I’m not sure they’d talk but I’d hope they would, to help someone else avoid a similar problem.

This story originally appeared on RealCentralVA.com and appears here by request.