Good Evening! I hope everyone had a wonderful day! I thought you'd enjoy this article on some of the highlights and lowlights of the real estate world that happened this year!
I hope everyone is having a wonderful Holiday season! Check out our website at http://www.homesaroundnashville.com/ for more real estate information.
Top real estate stories of 2006
Provided by Inman News
The year 2006 for many real estate professionals will be remembered as the year the market turned. The year was by no means a bust for housing -- most economists still expect it to be the third best on record for sales -- but a slowdown hit hard in many markets, causing brokers and agents to hunker down and focus on the basics. Memorable developments in online real estate include the launch of Zillow, a free site that offers valuations and information on some 64 million properties, and the explosive growth of real estate blogs. Also this year, more brokers started sending listings to search sites Google Base, Trulia and Oodle. And 2006 had its share of controversy, with the Federal Trade Commission initiating law enforcement actions against a number of MLSs, former Homestore CEO Stuart Wolff going to trial for his role in a lucrative accounting scandal, and banking regulators laying down tighter restrictions on riskier nontraditional, or "exotic," mortgages.
Here are our picks for the most memorable real estate stories of 2006:
1) Stuart Wolff found guilty. Former Homestore CEO Stuart Wolff, who was in charge when the company was caught up in a major accounting scandal, went to trial this year and was found guilty of conspiracy, filing false statements with the Securities and Exchange Commission, lying to accountants, fraudulent insider trading, and falsification of corporate books and records. He was sentenced to 15 years in federal prison, and ordered to pay $5 million in fines and restitution. Wolff is appealing the conviction and sentencing. Another former executive, Peter Tafeen, entered a plea agreement in March and agreed to testify against his former boss, Wolff. Tafeen pleaded guilty to one count of securities fraud for his participation in a fraudulent advertising scheme and was sentenced to 30 months in federal prison followed by three years of supervised release.
2) Zillow opens for business. The brains behind online travel giant Expedia made their debut in real estate this year with the launch of Zillow, a site that offers free access to online home-value estimates, coined as "Zestimates." The company quickly became Internet famous and climbed to the top of Web traffic results for real estate sites. Many real estate professionals have complained that Zillow's home-value estimates are inaccurate, and the company has said it intends to improve its data over time. Zillow's launch also set off a wave of copycat offerings and caused many Web sites to feature their home-value offerings front and center.
In December, Zillow announced it would allow consumers and agents to mark homes on Zillow as "for sale." The company also said that homeowners now can post a "Make Me Move" price for a property.
3) Important fair-housing ruling has implications for online listings sites. A U.S. District Court Judge in November ruled that online classified service Craigslist.org is not a publisher and can't be forced to stop its users from posting alleged discriminatory housing advertisements. Craigslist was sued in February by the Chicago Lawyers' Committee for Civil Rights Under Law, a nonprofit consortium of 45 law firms that works to end discriminatory housing practices. The ruling is the latest of several in which courts have held that Web sites that serve as intermediaries to allow users to post ads or commentary enjoy protections under the Communications Decency Act not afforded to print publications such as newspapers.
FTC ramps up antitrust crackdown. The Federal Trade Commission in October announced a "real estate competition sweep" that included seven law enforcement actions. The agency announced litigation against two multiple listing services and settlements with several other MLSs based on policies restricting a classification of property listings. Five consent agreements resolved separate investigations against the MLSs over similar policies that prohibited the display of certain property listings on some home-search Web sites, and the litigation targeted two MLSs in Michigan that refused to withdraw similar policies. One MLS, MiRealSource, has since agreed to settle, pending FTC approval. The FTC is proceeding in its complaint against RealComp II Ltd., a corporation owned by several Realtor boards and associations in Michigan that has about 14,800 members.
Also, the Justice Department's antitrust lawsuit against the National Association of Realtors proceeded this year and is still pending. The NAR has said it has no plans to settle the suit, which alleges the trade group's policies for online listings display are too restrictive, so we're bound to see this story again all throughout 2007.
4) RE/MAX unveils national network of home listings sites. RE/MAX International this year launched a national network of broker IDX Web sites, enabling consumers at www.remax.com to search among more than 1.7 million available home listings.Every RE/MAX office in the country has the chance to sign up for a broker IDX Web site to be included in the listings network. IDX, or Internet data exchange, is an Internet-based exchange of property listings data among real estate brokers. In addition to a spot in the national network, RE/MAX brokers have access to a back-end lead management system called Lead Street.
5)Real estate blogoshere comes to life. Real estate blogs really took off this year, with more solo agents getting into the mix and more blogging on collaborative sites. The weekly Real Estate Blog Carnival was born (thanks to Zillow for initiating this) and has picked up steam in its more than 20 weeks going strong. The blog carnival convenes at a new host blog each week where the blog publisher chooses the best posts of the week and displays them for real estate blog junkies to enjoy. Also, Inman News added the "Most Innovative Blog" category to the annual Inman Innovator Awards in July.
6) Year of market correction: Home sales decline, and decline again. Major market change hit the real estate industry in 2006. Inventory increased substantially in many markets and home builders started seeing their home orders decline and cancellations rise. The rate of existing-home sales ended a six-month slide and rose 0.5 percent in October compared to September, but remained 11.5 percent below the October 2005 level, according to the National Association of Realtors.
Home-price growth also cooled in many markets. Nationwide home-price appreciation in the third quarter was 0.86 percent, or an annualized rate of 3.45 percent -- the lowest since the second quarter of 1998, according to the Office of Federal Housing Enterprise Oversight. That compares to a 5.1 percent annual appreciation rate in the second quarter of 2006. Nationwide, home prices were up 7.7 percent in the last 12 months.
7) Hedge your housing bets. The Chicago Mercantile Exchange officially launched trading on housing futures contracts in May, allowing people to invest in the residential real estate market without actually owning property. Futures contracts currently are available for Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, D.C., and the Merc uses the S&P/Case-Shiller Home Price Index for each city in the futures market.
8) 'Exotic' loans get all the attention. In recent years, so-called "exotic" mortgages have increased in usage as buyers in expensive markets looked for new financing methods to be able to afford homes. These nontraditional loans -- including interest-only, no doc loans and various option adjustable-rate mortgages -- grabbed the attention of regulators, who grew concerned that many borrowers didn't understand the risk involved. Federal banking regulators published new guidelines for banks to follow when originating and underwriting nontraditional mortgages that carry potential payment shock for borrowers. The new guidelines require lenders to analyze a borrower's ability to repay not only the initial loan amount, but also any additional principal that may accrue in the case of a payment-option loan with negative amortization. Some banks and industry groups have said the guidelines are too restrictive.
9) Movement grows for MLS consolidation and data sharing. A number of multiple listing services this year pushed for consolidation and data sharing among MLSs that serve overlapping markets. In Chicago, plans are in the works to merge the Multiple Listing Service of Northern Illinois (one of the largest MLSs in the nation) and MAP MLS to form one larger broker-owned MLS. In Southern California, the Southern California Multiple Listing Service (SoCalMLS) and the Southland Regional Association of Realtors (SRAR) announced an agreement to form the second-largest multiple listing service in the nation. In Northern California, a group of MLSs formed the Northern California Real Estate Exchange (NCREX) in an effort to merge into a single MLS with a common database, common rules and a single fee for members.
Also in line with changing MLSs, the National Association of Realtors this year formed an advisory group to consider the future of MLSs.
Kickback probes, lawsuits spread. The title insurance industry continued to feel the weight of regulator attention this year as more probes into affiliated business arrangements and alleged illegal kickback schemes unraveled. An investigation in Washington state found the use of incentives and giveaways in the title insurance industry so pervasive that officials decided to focus on future prevention and compliance. That led consumers who bought title insurance from the companies to file a lawsuit seeking to recover the amounts the companies allegedly overcharged the plaintiffs and an injunction blocking further illegal inducements.
Article provided by Inman News.
Showing posts with label Real Estate Market. Show all posts
Showing posts with label Real Estate Market. Show all posts
Wednesday, December 13, 2006
Tuesday, December 12, 2006
Closing Costs
Home buyer closing costs could drop with fed's help
Written by Jack Guttentag
Every consumer taking a home mortgage today pays a tax in unnecessary charges for the various third-party services required to deliver the mortgage. These include services provided by title insurance companies, mortgage insurance companies, appraisers, credit reporting agencies, flood insurance companies, and escrow companies.
The taxes don't go to government, and in most cases the service providers don't keep them. Rather, they are paid to those who are positioned to direct which service provider will receive the business; these referral agents are mainly lenders, Realtors and builders. The payments include referral fees, which are sometimes legal and sometimes illegal. Some of the tax is absorbed by marketing expenses directed to the same referral agents.
The problem is not that there isn't competition in these industries, as the competition is actually intense, but it is directed to referral agents rather than to the consumers who pay for the service. Competition directed to referral agents drives prices up rather than down, since most agents are more interested in being paid for the referral than in negotiating lower prices for consumers.
Under the Real Estate Settlement Procedures Act (RESPA), referral fees are illegal, but this rule has been completely ineffective because it has left the power to refer business unchanged. Small referral agents often ignore the rule and large ones develop affiliated business arrangements, which convert illegal referral payments into legal referral payments.
There are several ways to eliminate or neutralize referral power. Much the most effective way is to require lenders to pay for all third-party services that they require, passing the cost on to borrowers in their rates and fees. Competition by third-party providers to sell lenders would then force the prices down, and rate competition by lenders would force them to pass the savings on to borrowers. This would require federal legislation, however, and the prospect of that ever happening is remote.
An approach proposed by HUD several years ago, which did not require new legislation, would have allowed lenders and others to package third-party services with loans, selling the package at an all-inclusive price. I supported this concept, but it was done in by its complexity, which included something to hate by every interest group in the country.
A third approach, which I recently proposed to HUD, aims to induce some referral agents to become agents of borrowers as a competitive strategy. A lender who negotiates lower prices with third-party providers and passes those prices on to its borrowers can gain a competitive advantage. There are, in fact, lenders who would do this now if not for a well-intentioned HUD rule that prevents it.
To use lower third-party fees as a competitive tool, loan providers must guarantee those fees. Otherwise, they have no way of distinguishing the fees they quote to borrowers from those quoted by competitors. Indeed, without an explicit guarantee, the low fees quoted are indistinguishable from those of low-balling competitors who have no intention of delivering.
But guaranteeing third-party fees is hampered by a HUD rule against marking up the prices of third-party services. Consider a loan provider who guarantees an appraisal fee of $400. If the actual cost comes in at $500, he must take the $100 loss, but if the actual comes in at $300, he must charge $300 to comply with the markup rule.
My proposal is for HUD to revise its rule toward markups on third-party charges as follows: Markups would be permitted by any loan provider that guarantees its own and all third-party charges.
The goal is to encourage loan providers to guarantee their own and all third-party fees. (I use the term "loan provider" because it covers both lenders and brokers, since the proposed rule should apply to both). On refinances, this would be all third-party fees. On purchase transactions, the guarantee would cover charges of service providers selected by the loan provider.
As loan providers offering fee guarantees become a force in the marketplace, borrowers will discover that they can shop rate and total guaranteed fees. This would fundamentally change the way the market works, and put downward pressure on all fees.
On purchase transactions, where the title agency is usually selected by the Realtor or builder, a new and in many cases lower-cost option would become available. In states where home sellers are obliged to purchase title policies for buyers, the availability of a lower-cost policy available through the buyer's loan provider could change the way business is done.
HUD could make the necessary rule change on its own, with minimum political flak. But HUD is a very politically sensitive agency, and I have no political clout. My hope is that others who do have clout will chime in to make it happen.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania.
CHECK OUT OUR WEBSITE AT WWW.HOMESAROUNDNASHVILLE.COM for more real estate information.
Written by Jack Guttentag
Every consumer taking a home mortgage today pays a tax in unnecessary charges for the various third-party services required to deliver the mortgage. These include services provided by title insurance companies, mortgage insurance companies, appraisers, credit reporting agencies, flood insurance companies, and escrow companies.
The taxes don't go to government, and in most cases the service providers don't keep them. Rather, they are paid to those who are positioned to direct which service provider will receive the business; these referral agents are mainly lenders, Realtors and builders. The payments include referral fees, which are sometimes legal and sometimes illegal. Some of the tax is absorbed by marketing expenses directed to the same referral agents.
The problem is not that there isn't competition in these industries, as the competition is actually intense, but it is directed to referral agents rather than to the consumers who pay for the service. Competition directed to referral agents drives prices up rather than down, since most agents are more interested in being paid for the referral than in negotiating lower prices for consumers.
Under the Real Estate Settlement Procedures Act (RESPA), referral fees are illegal, but this rule has been completely ineffective because it has left the power to refer business unchanged. Small referral agents often ignore the rule and large ones develop affiliated business arrangements, which convert illegal referral payments into legal referral payments.
There are several ways to eliminate or neutralize referral power. Much the most effective way is to require lenders to pay for all third-party services that they require, passing the cost on to borrowers in their rates and fees. Competition by third-party providers to sell lenders would then force the prices down, and rate competition by lenders would force them to pass the savings on to borrowers. This would require federal legislation, however, and the prospect of that ever happening is remote.
An approach proposed by HUD several years ago, which did not require new legislation, would have allowed lenders and others to package third-party services with loans, selling the package at an all-inclusive price. I supported this concept, but it was done in by its complexity, which included something to hate by every interest group in the country.
A third approach, which I recently proposed to HUD, aims to induce some referral agents to become agents of borrowers as a competitive strategy. A lender who negotiates lower prices with third-party providers and passes those prices on to its borrowers can gain a competitive advantage. There are, in fact, lenders who would do this now if not for a well-intentioned HUD rule that prevents it.
To use lower third-party fees as a competitive tool, loan providers must guarantee those fees. Otherwise, they have no way of distinguishing the fees they quote to borrowers from those quoted by competitors. Indeed, without an explicit guarantee, the low fees quoted are indistinguishable from those of low-balling competitors who have no intention of delivering.
But guaranteeing third-party fees is hampered by a HUD rule against marking up the prices of third-party services. Consider a loan provider who guarantees an appraisal fee of $400. If the actual cost comes in at $500, he must take the $100 loss, but if the actual comes in at $300, he must charge $300 to comply with the markup rule.
My proposal is for HUD to revise its rule toward markups on third-party charges as follows: Markups would be permitted by any loan provider that guarantees its own and all third-party charges.
The goal is to encourage loan providers to guarantee their own and all third-party fees. (I use the term "loan provider" because it covers both lenders and brokers, since the proposed rule should apply to both). On refinances, this would be all third-party fees. On purchase transactions, the guarantee would cover charges of service providers selected by the loan provider.
As loan providers offering fee guarantees become a force in the marketplace, borrowers will discover that they can shop rate and total guaranteed fees. This would fundamentally change the way the market works, and put downward pressure on all fees.
On purchase transactions, where the title agency is usually selected by the Realtor or builder, a new and in many cases lower-cost option would become available. In states where home sellers are obliged to purchase title policies for buyers, the availability of a lower-cost policy available through the buyer's loan provider could change the way business is done.
HUD could make the necessary rule change on its own, with minimum political flak. But HUD is a very politically sensitive agency, and I have no political clout. My hope is that others who do have clout will chime in to make it happen.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania.
CHECK OUT OUR WEBSITE AT WWW.HOMESAROUNDNASHVILLE.COM for more real estate information.
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