New Closing Process coming in August - Be prepared!

New MORTGAGE Information - Important

On August 1st, there will be a new roadblock to closing on a house

New integrated disclosure forms will wreak havoc in the home closing process.

On Aug. 1, 2015, the new TRID (TILA-RESPA Integrated Disclosure) forms replace the HUD-1 Settlement and Good Faith Estimate. The Consumer Financial Protection Bureau’s mission is to rebuild the mortgage banking landscape so that the industry will avoid the type of conditions that led to the Great Recession. The CFPB replaces the Department of Housing and Urban Development for oversight because HUD did not provide specific consumer protection.

Everyone agrees that increasing consumer protection is a desirable goal. Nevertheless, the unforeseen ripple effects from these changes could seriously disrupt how the closing process is conducted.

The new rules will require a new three-day waiting period when there are any changes in the TRID forms. The recommendation is to allow an extra 15 days to close your transactions. In other words, 30-day contracts will now require 45 days, and 60-day contracts will require 75 days.

Who will be hit the hardest?

The states that will be hardest-hit are those where the agents or principals must be physically present for the closing. “Escrow” states, like South Carolina,  where the documents and signatures are normally submitted a few days prior to closing, will be less likely to have issues.

In “closing table” states, clients, agents and attorneys are accustomed to routinely making changes at the closing table and still closing the sale on same day. The new three-day waiting period will severely limit this practice for items covered in the TRID documents.

The biggest headache: the moving van

When transactions don’t close on time, it’s common for one or more of the principals to be stuck with furniture on a moving van and nowhere to go. Any agent who has experienced an irate client in this situation knows how nasty this situation can be.

In most cases, these issues are resolved and the transaction closes the next day. Nevertheless, more than one agent has footed a hotel bill for their clients (especially those who are relocating). Moreover, if there are multiple properties involved, any delay on one home’s closing could delay others from closing, too.

Now imagine how much more complicated this could become if there is an error that retriggers the three-day TRID waiting period. Everyone will be scrambling to handle late closings — not just for one day, but for at least three days or more.

If this happens, can you allow the buyers to move in early? If so, you must enter into a separate lease agreement or Right-to-occupy prior to closing, then collect the first month’s rent plus a security deposit to protect both the buyer and the seller. Given how tight some buyers are on cash at closing time, this may not be an option.

Other potentially costly issues include situations where one of the principals must close by a certain date to take advantage of the tax breaks on the sale of their primary residence — or situations where one of the principals is involved in a 1031 tax-deferred exchange. The lost tax-benefit costs of a late closing could run into hundreds of thousands of dollars.

Interest rate games

If you have been in business for more than 10 years, you have probably experienced the shenanigans that some lenders pull when the interest rates increase. In fact, I have personally witnessed the scenario described below since the early 1980s. Here’s what happens:

Your buyer locks in an interest rate for 60 days. There is an increase in the interest rates. This means that the lender can no longer sell the buyer’s loan on the secondary market. As a result, the lender demands additional documentation. You submit the documents in a timely matter, but the underwriting department takes days to get to your changes. In the meantime, the buyers’ interest rate lock expires, and the property doesn’t close on time. At this point, the lender requires a higher interest rate in order to close the transaction.

It doesn’t take much imagination to see how easily this could play out with the new TRID three-day waiting period.

A tough transition

What will be particularly thorny are transactions closing in late July. If they fail to close by Aug. 1, 2015, how will they be handled? Does entirely new documentation have to be drawn? How long will the delays be?  Even lenders can’t answer these questions yet.

As we move closer to the Aug. 1 change date, clients need to know that there will be unexpected delays in obtaining loan approval, potential changes in the documentation during the transaction, and a host of problems I probably can’t even begin to imagine. When closing on a property with a mortgage you should always expect the unexpected, however these changes will impact all closings and will cause delays.  Set your mind to accept these changes, communicate often with your Realtor and Lender and you should still be able to enjoy the experience.  Better Start preparing now.

Market update for January

The Graphs below should tell you a story of a consistent market along the Grand Strand.  The Closed properties, in both segments, had a very flat final 5 months of 2014.  As you see, the start of 2015 didn't quite come in like a lion as many predicted.  The fall off in sales volume is consistent here with the national stats as existing home sales declined 4.9% in January.  The better news is that the price that properties are selling for has continued on a flat projection even with the selling volume decline.  The Average selling price of Condos & Homes along the Grand Strand has not varied by much over the past 2-3 years.  There has been some increase in single family pricing due to the high percent of New Homes selling over existing homes on the market.  New Homes on average sell for about 3% - 5% more than a similar home that is existing.  The most significant improvement in the real estate market over the past year has been the decline of Distressed properties available.  Right now there are 4300 single family homes on the market with only 191 of them in a distress state - less than 1%.  For condos and townhomes the number is equally low with 3386 available and only 99 distressed.  The Foreclosure & Short Sale impact on value is behind us now on the Grand Strand.  The reduction of these Foreclosures has aided in the improvement of the Median pricing, especially for homes.  

The good news is Interest Rates remain very attractive, local lenders have great programs for properties here including condo-tel designated villas, and the selection of great properties keeps a high level of qualified Buyers in the market.  

The market is a good market for both sides of a transaction especially if you have successfully moved past 2006 & 2007 as being your benchmark of a good market.  In the world of Graphs if you were to track pricing here for the last 15-20 years the average pricing is currently the same as the Fall of 2003.  Bear in mind that pricing has been about the same since the Spring of 2012 when it stopped going down.

The reality is we are in a robust market with good demand and equally good supply.  The balance in the market, in addition to, great interest rates and a steady stream of transplants leaving the Northeastern US for warmer weather, will keep our market stable and consistent through the next several years.  We should continue to see New Construction of single family homes help support pricing in this segment, but Condo pricing won't have anything to help pull it up as New Construction in this segment remains years away.

If you enjoy detailed market information and would like to read some of the data that I consume daily just send me an email with the request.  We want you to be as informed about the market where you own property as you are about the balance in your 401k.  Whether you are looking to buy or sell a property soon or not for a very long time spending a few minutes a month to be better informed certainly is worth the investment.

Have a Wonderful Day!

ben@benguyton.com

Is it aggressive or UNethical?

In my line of work I have the opportunity to speak with a lot of property owners each day.  During the conversations I will typically hear about how many real estate agents have called and it seems a little overwhelming to them.  If a property has been on the market and it failed to sell the information is sent out to a multitude of agents in the market that have an interest in helping get it sold, hence the calls.

The problem I keep coming up against is the difference between being aggressive, as an agent must be in the market, or being unethical.  What is the difference you ask?  There is a huge difference -

As a Realtor in the real estate field we are under a code of ethics sworn by our membership into the National Association of Realtors.  There is very specific language in the code the prohibits any Realtor from contacting you while you are a CLIENT of another real estate agent.  This means that if your home is listed, under a listing agreement, with one real estate agent any other real estate agent cannot contact you to discuss listing your property.  As the owner of the property you obviously have the right to speak with whomever you want as ling as you make the call to the agent.  The reason Sellers receive so many calls in the days after a property goes off the market is because the agreement is over and the Seller is no longer a CLIENT of the agent.  Other agents now know that the Seller has an interest in selling and therefore makes the call.

The issue is the calls you receive BEFORE your listing expires.  These are the real estate agents that choose not to abide by the code of ethics and try to circumvent a relationship you have established with your current Realtor.

Beware of confusing aggression with an unethical behavior.  The agent that calls to talk with you about your listing when it is still listing should be the last person you would want to trust your property with to get it sold.

I would encourage you to reach out to the Coastal Carolina Association of Realtors to file a complaint if you receive a direct call from any agent when your property is listed and they continue to talk about your listing with you after you inform them that it is currently listed.

For the best process in identifying the best agents out there shoot me an email and I will gladly share a proven strategy you should use to eliminate the rest and pick from the best.