Monthly Archives: March 2017

Single-family rentals score big in some parts of Pa.

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A few counties in Pennsylvania are giving landlords more bang for their buck in single-family home rentals, according to ATTOM Data Solutions’ Q1 2017 Single Family Rental Market report.

Monroe County offered one of the highest annual gross rental yields at 20.6 percent. Allegheny County also nabbed a high position on returns in a county with a population of at least 1 million at 10.6 percent, as did Philadelphia County at 10.1 percent.

“Single family rentals should continue to yield strong returns in many parts of the country going forward given the market undercurrents of low rent-ready housing inventory and low homeownership rates. Average fair market rents increased in 2017 in 86 percent of the markets we analyzed even while average wage growth outpaced rent growth in 67 percent of markets — a recipe for sustainable growth in the rental market,” said Daren Blomquist, senior vice president at ATTOM Data Solutions.

Delaware County was named one of the best markets for growth in single-family home rentals, averaging 14.1 percent return. Westmoreland County also saw some growth, with the annual average return hitting 14 percent.

The report analyzed 375 counties in the U.S., all of which had a population of at least 100,000. The average annual gross renal yield was 9 percent for the first quarter of 2017, down from 9.1 percent last quarter, according to the report.

For specific cities, in Pennsylvania, Chester, in Delaware County, has the best return, with the annual gross rental yield coming in at 54.6 percent. Meanwhile, New Hope, in Bucks County, only offers owners 2.7 percent return on their investment.

The price of single-family homes increased more than the average market rent in 57 percent of counties analyzed. Even with renters becoming buyers, single-family rental returns should continue to increase.

Selling a business

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Time and again, we receive calls on the legal hotline from members asking if they are “legally” allowed to sell a business without real estate.

Some of the related questions include:  Do I need a special license to sell the business? Can the seller pay a fee to me, a licensed salesperson, directly, or does the fee have to run through my broker? Do the Real Estate Licensing and Registration Act and the rules and regulations of the State Real Estate Commission provide guidance, and is my real estate license at risk for any problems that arise from the sale of the business part of the transaction?

Yes, your real estate license is at risk, even if the problem is with the business part of the transaction. No, RELRA and the rules and regulations do not provide guidance relative to the sale of a business.  It depends, maybe the fee can bypass a broker and be paid to the salesperson directly.

The idea of “selling a business” can have many iterations.  At its simplest, “selling a business” is matchmaking: introducing an interested buyer to the seller and letting their respective attorneys do the rest. Period. The other end of the spectrum involves valuing the business and real estate separately, allocating purchase price between real estate and assets, drafting agreements of sale, mortgage and loan documents, overseeing due diligence, etc.

Pennsylvania does not have any licensing requirements for individuals who market only businesses for sale. Business brokers may be generalists who have experience marketing, or they may be individuals with a specific industry knowledge. Usually, the business broker has contacts from which to draw as they function in the role of matchmaker, then stepping aside to allow the parties to negotiate the terms of the transaction.

When the sale of the business is tied to the sale of the real estate, the Real Estate Commission might be able to discipline you for your conduct in the transaction. When the real estate and business are sold together, the commission can look at your conduct in the whole transaction, even though you may contend that your activity as a business broker is distinct from your role as a licensee.  Depending on how deeply you involve yourself in the sale of the business, you could quickly find yourself beyond your area of expertise.  Remember, the commission can discipline you for failing to advise your client to seek expert advice in matters beyond your ken.

Tom Caldwell, my predecessor as general counsel to PAR, was fond of saying, “A smart man knows what he doesn’t know.”  When it comes to selling a business, with or without real estate, you should know that there is very little, if anything, in your training as a real estate licensee that prepares you for this task.

I feel there is but one way for a licensee to be involved in the sale of a business and that is as a matchmaker. List the property, market the business, but when a buyer comes along, deliver the buyer and seller to separate counsel. Provide information, be a part of the process, but do not have buyers and sellers sign documents you have prepared that have not been thoroughly vetted by an attorney. In most cases, perhaps in all cases, counsel should be drafting the documents used in the transaction.

Licensees who are asked to sell a business should consult with and obtain their broker’s approval. They should clearly explain to sellers their limited role in merely marketing the business, and locating potential buyers, and that it will be the role of the seller, with the benefit of counsel, to specifically structure the entire transaction. Keep in mind that certain sales do require specific licenses, like selling cars, and in other transactions, licenses must be separately acquired, like liquor licenses. Keep yourself out of trouble and “know what you don’t know.”  When in doubt, contact counsel.

Erie, Scranton, Allentown named top “overlooked dream cities”

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Pennsylvania cities nabbed three of the top five spots on GoodCall’s 2017 Overlooked Dream Cities.

The website analyzed cities with less than 300,00 residents, and rated them based on factors like crime rate, cost of living, amenities and walkability.

Erie landed in first overall, thanks to the low cost of living, which is 18.5 percent below the national average, as well as the city’s walkability. The city, nicknamed the Gem City, came in 71st out of 461 cities on its walk score, which rates cities on how walkable they are. Erie was also applauded for its entertainment and attractions, such as the Erie Zoo, Erie Art Museum, UPMC Park and Presque Isle State Park.

Scranton, also known as the Electric City, came in second place. The city’s affordability helped it land so high on the list, as it is 20 percent below the national average cost of living. Additionally, Scranton scores high on the walkability list, and offers residents many bars and restaurants downtown. The city also hosts the Steamtown Marathon each October.

Allentown rounded out the top five of the list. Its higher population (120,000 making it the third-largest city in the commonwealth) doesn’t take away from what Allentown offers. The city landed in 37th out of 461 cities for walkability, and the cost of living is 13 percent below the national average. With the new Riverfront district, the city offers even more stores, restaurants, offices and residential homes.

Other cities that made the top ten include Parma, Ohio, Appletown, Wis., Grand Rapids, Mich, Cicero, Ill., East Orange, N.J. and Green Bay, Wis.

 

 

Homebuyers still relying on referrals, in-person meetings for mortgage lenders

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Despite technological advances, referrals are still the main way homebuyers choose their mortgage lender.

Ellie Mae’s 2017 Borrower Insights Survey found that 23 percent of homebuyers picked their mortgage lender based on a referral from a friend or family member, 17 percent a referral from a bank and 16 percent a referral from their agent.

The survey also found that homebuyers are still mostly applying for their mortgages completely in person.

Fifty-seven percent of homeowners applied for and completed their mortgage in person, while 28 percent applied for and completed it partially in-person and partially online. Eleven percent reported that they applied for their last mortgage completely online. When asked what factor would have improved the mortgage process, approximately 40 percent of homeowners indicated they would have liked a faster process with fewer delays. Twenty percent indicated that a shorter, easier to understand application would be preferable, while 11 percent asked for more communication with their lender throughout the process.

The half and half solution, doing some of the process online and some in-person, was most popular with millennials (30 percent). Still, 28 percent of Generation X and 20 percent of baby boomers opted to go this route as well.

When going through the mortgage process, homebuyers are looking for speed, security and simplicity. Millennials and women both think security is the most important factor, while Generation X and baby boomers looked for speed. All cited simplicity as a big help.

“There’s no question that technology is playing a larger role in the home buying experience,” said Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae. “As we expected, many homeowners are seeking a faster and more streamlined experience. And it’s not just a millennial phenomenon; it’s homebuyers of all ages and both genders.”

“But what’s even more telling is that homeowners still want a personal interaction with their lender. They want someone who can answer important questions, and make them feel confident that everything will be handled correctly and on time. While 27 percent of millennials identified the speed of the process as the top area to improve their experience, surprisingly 23 percent cited more face-to-face interaction as the second-greatest opportunity for improvement. By leveraging technology, lenders can provide a more high tech experience to simplify and speed the overall process, while still having the high-touch interactions when and where homebuyers want,” Tyrrell added.

More sellers tried to negotiate agent’s commissions last year

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More than half of sellers in 2016 attempted to lower their listing agent’s commission.

According to a recent survey from SurveyGizmo and Redfin, 57 percent of sellers tried to negotiate, an increase of 5 percent from June. And millennials are the generation most likely asking for a break. Nearly two-thirds report they asked their agent for a lower commission rate. Fifty-eight percent of Generation X members and 39 percent of baby boomers so tried to negotiate.

For buyers, 49 percent reported receiving a refund, a contribution toward closing costs or something else worth at least $100. This is an increase of 3 percent from June.

The survey also found that political opinions continue to be a hot issue these days. Nearly half of respondents (42 percent) reported they would hesitate to buy in an area that had differing political views. Millennials (47 percent) were the highest generation with qualms.

Online statistics continue to increase in popularity. Ninety-five percent of sellers checked their home estimates online, while 72 percent of sellers said they checked the estimates of their home value, on sites like realtor.com®, at least once a week before they put their home on the market. Twenty-two percent checked daily, or close to. Not surprisingly, millennials were the most likely to check the most often, as 78 percent checked at least once a week, and 28 percent checked daily or close to.

Home estimates impacted buyers too, as 84 percent checked estimates online, and said it affected their buying plans.

However, Americans are more worried about the income gap, as well as affordable housing in the country. Forty-two percent reported that the income gap is their biggest concern, while 41 percent said they are concerned about affordable housing. Thirty-five percent are worried about the federal budget deficit.

Homebuying, mortgage process stressful for many consumers

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Forty-two percent of homebuyers reported that the homebuying process was stressful, according to NerdWallet’s Home Buyer Reality Report.

Nearly one-third said it was complicated, while 21 percent reported it was intimidating. However, 30 percent described the experience as rewarding, while 41 percent it was manageable. Yet, 49 percent reported they would do something differently if they were homebuying again.

Mortgage applications are still confusing many homebuyers, as 58 percent of homebuyers applied for one. Forty-one percent of homebuyers who did apply said they were not sure of all the options available to them. And 28 percent said they did not feel like a priority to their mortgage professional during the loan process. Overall, 89 percent of applicants were approved for a loan to buy their house.

Among generations, 27 percent of millennials believed their mortgage rate was affordable when they purchased, and 39 percent said the mortgage process was positive. Eighty-nine percent of millennials who applied were approved. However, 11 percent of millennials said that after purchasing their home, they didn’t feel financially secure anymore. More than half (57 percent) said they had regrets in their homebuying experience.

Only a quarter of Generation X members reported a positive experience with the mortgage process, but 91 percent of Gen Xers were approved for one. Twelve percent reported not feeling financially secure after homebuying. Sixty-one percent reported that they would do something differently when homebuying again.

As for baby boomers, 25 percent found the mortgage process stressful, but 42 percent said it was manageable. Sixty-five percent said they believed they were aware of all their options for mortgages during the process. Only 6 percent said they did not feel financially secure after they bought their house, but 38 percent of baby boomers would act differently when homebuying again.

Home prices continue to rise, but growth expected to slow

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Home prices rose 6.9 percent year-to-year in January, per CoreLogic’s January U.S. Home Price Insight Report.

Excluding distressed sales, home prices increased 5.8 percent from year-to-year. From December to January, home prices saw an increase of 0.7 percent, including distressed sales, 0.5 percent excluding them.

CoreLogic predicts home prices will see just a 0.1 percent increase from January to February. Year-to-year, home prices are predicted to rise 4.8 percent by January 2018.

“With lean for-sale inventories and low rental vacancy rates, many markets have seen housing prices outpace inflation. Over the 12 months through January of this year, the CoreLogic Home Price Index recorded a 6.9 percent rise in home prices nationally and the CoreLogic Single-Family Rental Index was up 2.7 percent – both rising faster than inflation,” said Dr. Frank Nothaft, the chief economist for CoreLogic.

In January, 13 states, as well as Washington, D.C. hit new home price peaks. Only Maine saw negative home price appreciation.

In Pennsylvania, home prices decreased 0.2 percent from December to January. Year-to-year, the commonwealth only saw an increase of 2.9 percent. CoreLogic predicts that prices will increase 0.1 percent in February, and 3.9 percent by January 2018 in Pennsylvania.

“Home prices continue to climb across the nation, and the spring home buying season is shaping up to be one of the strongest in recent memory,” said Frank Martell, president and CEO of CoreLogic. “A potent mix of progressive economic recovery, demographics, tight housing stocks and continued low mortgage rates are expected to support this robust market outlook for the foreseeable future. We expect the CoreLogic Home Price Index to rise 4.8 percent nationally over the next 12 months, buoyed by lack of supply and continued high demand.”

Consumers more confident about housing than ever

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Now is a “good time” to buy or a sell a home, according to more Americans.

The Fannie Mae Home Purchase Sentiment Index® rose to 88.3 percentage points in February, an all-time high and an increase of 5.6 percentage points since February. The HPSI also increased 5.6 percentage points year-to-year.

Forty percent of Americans said it a good time to buy, an increase of 11 percent from February. Additionally, the percentage of those who think it is a good time to sell rose to 22 percent, a survey high and an increase of 7 percent from the last HPSI.

More than half (55 percent) believe mortgage rates will decline over the year, consistent with the past two months. Forty-five percent believe home prices will continue to rise, an increase of 3 percent.

“The latest post-election surge in optimism puts the HPSI at its highest level since its starting point in 2011. Millennials showed especially strong increases in job confidence and income gains, a necessary precursor for increased housing demand from first-time homebuyers,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Preliminary research results from our team find that millennials are accelerating the rate at which they move out of their parents’ homes and form new households. However, continued slow supply growth implies continued strong price appreciation and affordability constraints facing millennials and first-time buyers in many markets.”

Americans are also more confident with their lives outside of housing. Seventy-eight percent reported they are not concerned about losing their job, an all-time survey high and an increase of 9 percent. Additionally, 19 percent of respondents said their household income is “significantly higher” than it was a year ago, an increase of 4 percent, and a new survey high.