Happy Labor Day Weekend! As that wise guy, Ovid, once said, “Take rest. A field that has rested gives a bountiful crop.” Here’s to a restful weekend and a bountiful future.
With buyers getting cold feet, appraisals falling short, and loan applications failing, buyers are canceling contracts more often now than we’ve seen in over a decade. Over 63,000 contracts canceled in July alone.
Why it matters: As sure as an angel gets its wings every time a bell rings, a dispute over the earnest money deposit arises whenever a buyer cancels the contract.
What we’re seeing: Whether justified or not, many sellers and buyers assume automatically that they’re entitled to the deposit if the buyer cancels the contract.
- This puts their real estate agents and the escrow agent, in the middle of a tense situation.
- Some agents disappear to avoid dealing with the problem.
- Sellers can’t re-activate the listing on the MLS until the dispute is settled, the Closing Date passes, or until the buyer agrees to release the contract.
Tips for agents:
- Always remember what it means to be a “transaction broker” especially if there is no agent on the other side of the transaction.
- Set the customer’s expectations about the deposit when going over the contract during the signing. Point out that time is of the essence. Missing a deadline can lose the deposit.
- Communicate a lot and stay on top of deadlines to protect the customer’s rights to the deposit should the contract break.
- If the brokerage is holding the deposit, use the escrow disbursement order process for a quick resolution.
- Direct the customer to a real estate attorney who will explain their options in a direct and factual way.
The bottom line: Most escrow deposit disputes are resolved quickly, but too many disputes drag on unnecessarily because parties are unreasonable. An attorney can break through the stubbornness and anger with an explanation of what the party will be facing financially if they continue down that path.
|The axiom is that “real estate is local,” meaning that one had to be in the local area to know where to buy and where to avoid when investing in real estate. But technology is changing that.|
Why it matters: With websites, apps, and services dedicated to helping investors diversify their portfolios from stocks and bonds and into rental real estate, we’re seeing clients buying properties thousands of miles from where they live and know the market.
Go deeper: An article in a recent edition of The Wall Street Journal (subscription required) highlights the newest wave of these “laptop landlords” who are usually upper middle class executives and professionals who live and work in expensive areas, but want to diversify their investments to hold rental real estate alongside their stocks, bonds, and mutual funds.
By the numbers: Between 2019 and 2022, North Carolina, Mississippi, and Arizona saw the largest increase in the number of homes purchased by small investors from out of state. Florida was in the next tier of states, seeing such an increase.
The investors use sites like BiggerPockets for networking and education, and Roofstock to find rental homes for sale in other states. We’re also a big advocate for local real estate investor associations like CFRI as sources of knowledge about local markets. REIA’s are great sources to connect with local accountants, real estate attorneys, insurance companies, title companies, property managers, and other investors in the area where an investor may be “farming” for new real estate investments.
Biggest wins we’ve seen clients have investing in other states:
1. Find rental homes, multifamily properties, mobile home parks, and storage unit projects in areas where prices are much lower than local, but still turn a profit like local properties.
2. Maintenance costs and real estate taxes are lower in the other states.
1. Eviction laws differ from state to state
2. Unexpected state income taxes and additional “foreign seller” taxes at the sale of the property
Our thought bubble: Whenever going into another state, team up with an experienced local broker and attorney to make sure you don’t step into deep trouble.
- The top five cities where a median renter can find an affordable home to buy (hint, none are in Florida). The Title Report
- Redfin’s RedfinNow iBuyer service has expanded into Florida, giving sellers another outlet to sell their property to a cash buyer. Bloomberg
- This Labor Day, employees are starting to lose their bargaining power for higher wages and better working conditions (i.e. from home) as layoffs are rising. Bloomberg
- Economists are all over the place on predictions right now when it comes to housing, but at least one says that prices won’t come down even if there is a housing recession. CNBC
- And other economists are using another buzzword when discussing the state of the housing market: “balanced.” That doesn’t sound so bad, does it? Realtor dot com
- And data is bearing out the fact that the market is starting to normalize and settle back into a routine that predates the predating of the pandemic. The Title Report
|September is National Guide Dog and Service Dog Month. We are enthusiastic supporters of Southeastern Guide Dogs near Bradenton. If you want to see what the four years of training look like before a guide dog or service dog goes to work, their campus is a great place to visit and support.|
The song running through my head this Labor Day weekend is one from my college days that didn’t mean much to me until I hit middle age.