Real Estate News
The Federal Tax Law
Here’s how the newly-adopted federal tax law affects home ownership:
A. Retains the exclusion of gain on the sale of a principal residence. [There had been a proposal to change the amount of time a homeowner must live in their home to qualify for the capital gains exclusion and to phase out the exclusion for taxpayers with incomes above $250,000 single/$500,000 married.]
B. Changes the Mortgage Interest Deduction
1. The limit on deductible mortgage debt is reduced to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap.
2. Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.
3. No deduction for interest paid on home equity debt. Interest is still deductible on home equity loans (or second mortgages) only if the proceeds are used to substantially improve the residence.
4. Interest remains deductible on second homes, subject to the $1 million/$750,000 limits.
C. Caps the deduction for state and local taxes at $10,000. This is for the total of state and local property taxes and income or sales taxes. It precludes the deduction of 2018 state and local income taxes prepaid in 2017.
D. Increases the standard deduction of $12,000 for single individuals and $24,000 for joint returns. This reduces the value of the mortgage interest and property tax deductions as tax incentives for homeownership.
SEPTA Approves King of Prussia Rail Plan
The SEPTA Board of Directors officially approved a plan to extend the Norristown High Speed Line into King of Prussia. While a step forward for the plan, the project is not yet fully approved. An environmental impact statement must be presented, public hearings on the impact statement must be held and a vote for final approval will need to be taken. The final environmental impact statement is expected to be released in 2019. For more information, visit
Judge orders countywide reassessment
Delaware County Common Pleas Court Judge Charles B. Burr has ordered the first complete reassessment of all property valuations in the county since 2000 to address an apparent lack of uniformity in violation of the Pennsylvania Constitution. “We believe the reassessment is long overdue and this is the proper way to deal with the lack of uniformity within the county,” said Philadelphia attorney John J. Murphy III, who represented two sets of homeowners in an underlying assessment challenge. The reassessment, which will become effective January 2021, is the ultimate result of a pair of assessment appeals filed. The Pennsylvania Constitution includes a “uniformity clause,” which provides that “all taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax.” In essence, Murphy said, the county violated that clause with wildly differing assessments on older and newer construction. The brief notes that the state allows counties to adopt either an annual valuation method or a “base method” of property valuation in levying taxes. Delaware County has opted for the base method, which uses a given property’s base-year assessment as the basis for taxation in subsequent years. Delaware County uses an Integrated Assessment System developed by Tyler Technologies to generate home valuations based on an analysis of comparable sales, according to the brief. The system employs a concept called “distance points” to identify comparable sales, in which lower points are assigned to more similar sales.
Source: Daily Times; 3/29/2017
Devon Yards:Urban Outfitters
Urban Outfitters, Inc’s new plan for Devon Yards is being considered by Easttown Township officials. The new plan will no longer include a four-story apartment building and parking deck on the eastern side of the former Waterloo Gardens property that had been residents’ main objection to the project, the letter said.
The retail company “has long envisioned a vibrant ‘Devon Yards’ lifestyle center on the site of the old Waterloo Gardens in Devon,” Ziel said in his letter. The “plan is to build a large format Anthropologie store, Terrain garden center, and Terrain Café, alongside award winning chef, Marc Vetri’s Amis and Pizzeria Vetri. We have pursued this goal for three years and have been gratified by the community’s strong support for our vision.”
Urban Outfitters “has supported the proposed zoning changes for both its own and the developer, Waterloo Devon, L.P.’s project. The community, however, raised concerns regarding certain elements of the proposed mixed use development. We had initially believed that an accommodation could be reached that would satisfy everyone. When it became clear, however, that a compromise would not be reached, (Urban) worked with Waterloo Devon, L.P. to find a solution that would address the community’s concerns and allow the Devon Yards project to proceed. Source: Main Line Media News and Easttown Township’s website
Higher the Walkability, Higher the Home Value…Realtor Magazine
A study by the Brookings Institution found that the walkability of urban areas has a direct impact on real estate values and rents.
Using Washington, D.C., as a test case, the report identified five levels or steps in walkability. For every step up the walkability ladder, the price per square foot jumps more than $300 on average for apartment rents, versus $82 for house values, $9 for annual office rents, and $7 for retail rents. Moreover, with each step up the ladder, the average household income climbs $10,000.
Brookings senior fellow Christopher Leinberger says both city centers and suburbs are seeing an increase in demand for walkable space, noting that over half of walkable places in the Washington, D.C., area are in the suburbs. He says, “This trend is about both the revitalization of center cities and the urbanization of the suburbs.” He adds that encouraging construction of more walkable places is a long-term solution to the affordability challenge, noting that it is cheaper on a usable square foot basis to build walkable urban infrastructure than drivable suburban infrastructure. Source: New York Times as reported by Realtor Magazine
Agency issues in the News
A Maryland Senate committee last week spiked a bill that would have changed the heads-up disclosure form homebuyers and sellers get from real estate agents about who’s representing whom.
The bill would have added the terms “exclusive buyer agent” and “exclusive seller agent” to the types of agents defined in the form, along with an explanation of what “single agency” means (a real estate brokerage representing only the buyer or the seller in the same transaction) and what a “subagent” is (someone assisting the buyer but employed by the brokerage being used by the seller).
It also would have ramped up a warning in the consent form a buyer and seller are supposed to sign if they end up with same real estate broker, saying “there will likely be a conflict of interest because the interests of the seller and the buyer are different or adverse.” (Right now it says “may be a conflict of interest” and “may be different or adverse.”)
The bill additionally would have required brokerages to keep the signed disclosure forms to prove they actually gave them to clients. Lack of disclosure, or lack of timely disclosure, is a nationwide problem.
Exclusive buyers’ agents — who work for companies that only represent buyers and consumer advocates argued for the change, saying the current system is fraught with conflict-of-interest problems and Marylanders ought to be aware of all their choices.
View on Homeownership
The results of a biannual survey, released recently by real estate search and marketing portal Trulia, found that 80 percent of homeowners plan to buy another home, and that most survey participants view homeownership, and placing money in a 401(k) or other retirement account, as the best long-term investments. Market research firm Harris Interactive conducted the survey, which drew responses from 1,392 homeowners and 758 renters.
According to Forbes Magazine here are eight things housing experts expect to see in 2017:
1. Prices will continue to rise–but more slowly.
Prices rose every month last year (through October) with the largest gains coming in the later half and a 5.61% increase in national. Experts expect prices will continue their climb, but gains will slow.
Redfin expects the median home sale prices to gain 5.3% in 2017 compared to 2016.
2. Affordability will worsen.
Wages are expected to grow in America’s big cities this year, but the share of homes affordable to someone earning the median income is not. This trend, which has stymied many aspiring to buy their first home over the past few years, will be intensified by a continued shortage in low- to moderate-priced inventory and rising mortgage rates
3. Mortgage rates will be volatile.
The two major political events of 2016 set mortgage rates moving in opposite directions. In June, the British vote to exit the European Union put rates near a record low. In November, the U.S. election of Donald Trump had the opposite effect.
4. Credit availability will improve–maybe.
By and large early Trump administration priorities are not expected to deal directly with housing. However, the president-elect and his team have made it clear that they hope to roll back much of the post-crisis financial regulation laid out in the Dodd-Frank Act. In theory, this could open up banks to lend more freely to wide-range of would be buyers.
5. Supply will improve but remain short.
Declining inventory was without a doubt the defining feature of the housing market in 2016. It led to price appreciation, as well as a hyper fast market for buyers and discouraged would-be-sellers who feared entering the buying fray. A complete turnaround is unlikely in 2017, but there are some signs the coming year could see a small bump in housing supply–at least on the new home front.
6. More Millennials will become homeowners–and renters.
According to Zillow half of all buyers are under age 36. Not every economist agrees with this assessment, however it is clear that Millennials will continue to make up a large and growing portion of the buyer pool. Of course much of this is due to the fact that Millennials–adults born after 1980–are now the largest adult generation and make up the greatest percentage of the workforce. Redfin expects Millennial homebuyers will move from the coasts to “inland markets” where starter homes are more affordable.
7. Competition will grow fiercer.
In 2017 sellers will maintain the edge over buyers as demand is expected to increase. In 2016 the typical homes stayed on the market for just 52 days, about a week faster than in 2015 and the fastest year since Redfin began measuring in 2009. The brokerage expects 2017 to be even faster.
8. Political uncertainty will be replaced with policy uncertainty.
Owning a Home Retains Allure
Nearly nine in 10 Americans say homeownership is an important part of the American dream, according to the latest New York Times/CBS News poll. And they are keen on making sure it stays that way, for themselves and everyone else.
Support for helping people in financial distress over housing is higher than support for helping those without a job for many months. Source: NY Times
Staging Results in Quicker Sale
Ninety-four percent of staged homes sell within 33 days, compared to non-staged homes which sell in 144 days, according to StagedHomes.com. Showing photos of a property before it’s been staged and after often helps the seller understand the difference. Research shows the return on investment is about 568 percent. Nearly 25 percent of properties are staged today, up from 10 percent about 10 years ago
According to some sources, staged homes average 10 to 20 percent more in sales price.
“Open Houses Attend at Your Own Peril.”
Buyers who plan to visit an open house without their own agent could be setting themselves up for problems. At worst, they could lose the chance to have their own representation, says Doug Miller, executive director of Consumer Advocates in American Real Estate. The reason often boils down to commissions, which is how real estate agents get paid. Listing agents, the ones who run the open houses, represent the seller. They have a fiduciary responsibility to represent the seller’s best interests, which, not surprisingly, are often in conflict with the buyer’s best interests.
Miller recommends buyers work with an exclusive buyer’s agent who makes sure the buyer’s best interests are protected when they go into contract and closing. Typically, the buyer’s and seller’s agents split the commission. But if a listing agent shows a buyer an open house, that person could claim that he or she has done all the work and refuse to share the commission with another agent. At an open house, just by walking in the door on their own, buyers create the potential for a commission dispute, says Miller.
To avoid complications, buyers should establish a relationship with a buyer’s agent before house hunting begins. Ideally, buyers and their agent will visit open houses together. Barring that, buyers should tell the open house listing agent that they have their own representation, then provide that agent’s name, says Gary Rogers, a seller’s agent in Waltham, Mass. Otherwise, if the seller’s agent refuses to share the commission, buyers could be stuck making a difficult decision: paying for a buyer’s agent out of pocket or proceeding with the listing agent who could take on a “dual agent” role. State laws vary, but most states will allow a listing agent to become a dual agent, says Walter Molony, a spokesman for the NAR. The dual agent would be prohibited from negotiating the purchase price or terms on the buyer’s behalf, says Miller. Source: SmartMoney.com
Good News for Folks Frustrated with their Mortgage Company
Consumers have a new resource for mortgage problems, as a result of recent legislation. It is found online at: http://www.consumerfinance.gov/ Consumers may also call at: (855) 411-CFPB (2372). Hopefully, homebuyers having issues obtaining a mortgage (and there are too many to enumerate) will be able to find some assistance here as well.
Home Buyers Go Hunting Alone
After years of trepidation, home buyers are finally beginning to wade back into the housing market. But as they do, many are making the surprising choice to hunt alone, rejecting the assistance of what’s known in real estate as a buyer’s agent.
Many experts think this is a bad move – worse, for example, than trying to sell a house without an agent. For one thing, in most cases, a buyer doesn’t pay an agent; the buyer’s agent splits the commission with the seller’s agent, so the services are essentially free to the buyer. Also, a buyer’s agent can usually access historical price data for home sales in the area, which means he can recommend a bidding strategy that targets comparable properties that sold for less, rather than the mid-range. John Vogel, adjunct professor of real estate at the Tuck School of Business at Dartmouth College, calls going through this process alone “a mistake.”
In many cases buyers may be at an advantage when they work with a buyer’s agent – at least compared to relying on a seller’s agent for advice or guidance. A seller’s agent is contractually obligated to help make the sale happen in the seller’s favor, often as close to the asking price as possible. Read full article. Source: Smart Money
Best Places to Retire
While many people associate retiring with moving south, that isn’t necessarily the trend anymore.
Florida is still at the top of the list of the best places to retire, but some of the other most beneficial placesfor retirees may surprise you. In fact, Pennsylvania was recently named the 11th best state to retire, according to WalletHub.
The study analyzed 31 “key indicators of retirement-friendliness,” including affordability, health-related factors and overall quality of life. Some factors included the adjusted cost of living, the annual cost of in-home services, WalletHub’s taxpayer rating, the percentage of the workforce that is aged 65 and older, most museums per capita, most theaters per capita, percentage of overall population aged 65 and older, life expectancy and property crime rate.
Overall, the commonwealth landed in fourth for quality of life, 20th for affordability rate and 32nd for health care, scoring overall 63.23 out of a possible score of 100. Pennsylvania also landed in the top five for most theaters per capita, as well as tying with Vermont for having the fourth-highest percentage of residents 65 and older, according to WalletHub.
WalletHub noted that many retirees cannot rely on their social security or pension to support their cost of living, so the more affordable a state, the better it is for retirement, making Pennsylvania a top choice.
Florida, scoring 69.22, Wyoming, South Dakota, Iowa and Colorado were labeled the top five best states for retirees, while Hawaii, Connecticut, the District of Columbia, Alaska and Rhode Island scoring a 43.84, were labeled the worst five states for retirement.
Source: Just Listed, Pennsylvania Association of Realtors
FICO Score No – No’s
Recently, credit reporting agencies revealed what deductions occur in FICO scores with certain actions by borrowers. Many were surprised to see how difficult it is to get a good FICO score and keep it over time. As many in the industry have noted, taking care of your credit record is quite important and as the evidence above shows, your record is sensitive to any lapses or mistakes.
for Borrowers with a sub-prime 680 score and an eight-year credit history with two delinquencies
· Maxing out a credit card: reduces FICO by 10-30 points
· Produces a one-month delinquent payment: reduces FICO by 60-80 points
· Settles a credit card balance without full payment: reduces FICO by 45-65 points
· Agrees to a short sale: reduces FICO by 55-75 points
· Accepts a foreclosure: reduces FICO by 85-105 points
· Declares bankruptcy: reduces FICO by 130-150 points
The impact of these acts on a less risky borrower, one with an excellent 780 score (or one who has not missed a payment in 15 years):
· Maxing out a credit card: reduces FICO by 25-45 points
· Produces a one-month delinquent payment: reduces FICO by 90-110 points
· Settles a credit card balance without full payment: reduces FICO by 105-125 points
· Agrees to a short sale: reduces FICO by 115-135 points
· Accepts a foreclosure: reduces FICO by 140-160 points
· Declares bankruptcy: reduces FICO by 220-240 points Source: Real Estate Today
Tips for Buyers Navigating the Current Housing Market
How can buyers find their way in the current marketplace, with its shifting home prices and an extensive inventory that includes many distressed properties? Here’s some advice on how to speed up the process from experienced real estate professionals.
-Do enough looking to get to know your local market. Each local market has its own character, and buyers must adjust their expectations accordingly. Otherwise you can continue looking for a home that doesn’t exist.
-Let your emotions help you. Only looking at price and condition leaves emotion out of the equation which makes it difficult for buyers to commit to a purchase.
-Decide if a distressed property is really right for you. Foreclosures and short sales offer buyers great value, but these properties tend to have their own limitations. Foreclosures almost always sold “as is”. Short sales take months to get to the closing table, and transactions can eventually fall apart.
-Don’t focus too heavily on price.
Consider the other benefits of purchasing—the tax deductions, the amazingly low mortgage interest rates currently available
-Be ready to negotiate. Initiate a negotiation. Make an offer at a price you are comfortable with, even if it is well below the listed price. The seller may negotiate. Sellers don’t want a viable buyer to walk away.
-Don’t let negative comments about the housing market scare you off. Buyers shouldn’t lose sight of the many positives in the current market, such as the fact that home affordability is at its highest in decades. Buyers should keep their eye on the numbers that directly impact them—property prices, interest rates and how those translate into monthly payments. Source: RIS Media
5 Traits of Today’s Home Buyers
A survey by American Lives, a consumer research firm in California, conducted a study for the trade magazine Builder to answer that question. Here are their conclusions:
· They are young. Most are under 45. Half said they had annual household incomes of $75,000 or less.
. Two-thirds are married.
· They are frugal. They consistently told surveyors they were eager to live a simple lifestyle.
· They are concerned about their financial future. About 70 percent said the economy is “not so good” with 27 percent saying it was getting worse and 27 percent saying it was getting better, and two-thirds saying it would get better in a year. Some 55 percent said they were concerned that they might lose their jobs.
· They see themselves as energy efficient but not necessarily “green.” About 32 percent said they’d pay extra for energy-efficient features but only 16 percent said they’d pay extra for recycled or renewable construction materials.
· Neighborhood is important. Ninety-five percent said they thought the community was as important as the home itself. Seventy-nine percent wanted the most square footage they could afford, but 69 percent said they’d consider a smaller home in the right neighborhood. Source: Inman News, Mary Umberger