I receive a lot of real estate related questions. Each month, I’ll share a selected topic with you. Hope you enjoy reading them as much as I enjoy writing them!
Q: What is the MLS and how does it work?
A: MLS stands for Multiple Listing Service. It is an electronic posting system on which real estate professionals post their listings of homes for sale. It is the backbone of the residential real estate industry. At the core of its complex structure, there is simple elegance in how this unique system works for everyone’s benefit.
First, let’s consider markets without the benefit of a multiple listing service.
I have colleagues in several European and Asian countries. When buyers want to buy a home there, they have to painstakingly visit every local brokerage and ask to see its in-house inventory of listings. It’s hard to scour the market and find every home that’s a potential match. There is no comprehensive system. Buyers have to go and shop at brokerages that work for the seller!
In contrast, home buyers here have access to ALL listed homes. A buyer can work with an agent to scour the MLS for all listed homes that match the buyer’s criteria. A buyer gets to compare and make the purchase decision based on the best fit, value, and terms. This is the best way to find the right home compared to any other method. An agent can show homes listed by all other brokerages. As a result, a buyer’s agent has inventory of every listed home on the market. And a listing agent has access to all the buyers in the market place.
For a system to be so time-tested and work so well, there are 3 fundamental attributes it must have: (1) The listing inventory must be comprehensive. (2) The information must be reliable. (3) There must be incentive for all to use it.
(1) The comprehensive listing inventory is achieved by the stipulated agreement of MLS members and the local real estate board that all listings of a member brokerage must be posted, effectively ensuring the MLS contains virtually all homes listed for sale.
(2) The reliability of the information and listing status is enforced by rules and regulations that result in fines for mistakes and non-compliance. It is both supervised and self-policed. Any agent can report errors in a listing by a simple click of a button. This is in contrast to most 3rd party real estate websites which infamously contain egregious errors, misinformation, outdated data, and outright fraudulent listings. (See Buyer’s Corner on page 5)
(3) Finally, the incentive is accomplished by the fact that when a listing is posted on the MLS, there is compensation offering to buyer’s agents for procuring buyers. The listing brokerage is in effect recruiting all the available agents to bring buyers to complete the sale of a listed home. This is why a Keller Williams agent can sell a RE/Max listing, a Coldwell Banker agent can sell a Watson listing, and so on.
The benefit for a home buyer has been illustrated at the beginning. For a home seller, the benefit is maximum exposure to all potential buyers. When you want to sell a product, you want every potential customer to know about it. Through MLS and its myriad syndications, a home listed on the MLS even has global reach. I routinely receive international inquires on homes I list locally! Maximum exposure creates maximum demand which results in highest achievable price.
Now you know the importance of the MLS, make sure your agent understands the inner workings of this system and how best to maximize its utility as a tool. A tool is only as good as the individual using it.
Hope this discussion has been informative for you. As always, keep sending me your real estate questions.
Until next month, take care!
I receive a lot of real estate related questions. Each month, I’ll share a selected topic with you. Hope you enjoy reading them as much as I enjoy writing them!
Q: What do different listing status mean?
A: When a home is listed in the MLS for sale, it is an ACTIVE listing. When real estate agents and home buyers search for homes, they are most interested in these listings, because they are readily available.
When a home seller receives a written offer from a buyer, the seller may accept, reject, or make a counteroffer. If the negotiation is successful and both parties reach an agreement on price and all terms, both parties should sign the purchase contract and a mutually binding contract is thus achieved. At this point, it’s best to not refer to this agreement as an “offer” anymore. It is now a “contract”. The seller cannot sell this home to another buyer. A seller can receive multiple “offers”, but can only have one “contract”.
This is when a listing status is changed to PENDING. The home is technically off the market now and there are no more showings. Sometimes people call this “contract pending”. But it really means “under contract pending closing”. The home has a buyer, but the buyer is usually not ready to buy the home just yet. There are conditions that must be met first. These are referred to as “contingencies”. It is like when we say “Pool party this Saturday, weather permitting”. The “weather permitting” equivalent in a real estate transaction are the contingencies. The usual ones are inspection contingency (does the home have defects), appraisal contingency (does the home have market value at least that of purchase price), and financing contingency (can the buyer successfully get a loan to buy the house). Sometimes there are more complicated contingencies. One example is when the buyers must sell their old home first, before they can buy the new one.
Every one of these contingencies must be successfully satisfied and removed, before there can be a closing. Otherwise, the contract may get cancelled and the deal “falls through”. This is always a risk. That’s why we call the listing status “PENDING”, and not “SOLD”. Often sellers say their home is “sold”, and buyers say they “bought” a home, when in fact it’s just under contract. Only when the closing has occurred and the title has transferred, do we say a home is “sold”.
So what if a Seller is uncomfortable with taking her home off the market for 2 months only to have the deal fall through? She can solicit a backup buyer. Our MLS allows a listing status “ACTIVE WITH CONTRACT” for a contract that still has outstanding contingencies AND the Seller wants a backup contract. It’s important to note, a backup contract is a substitute only if the primary contract dies. The arrival of the backup does not displace the primary contract (that would be a different matter involving a kick-out provision). If you are a seller and want a backup, be sure your agent handles it properly, so you don’t end up in a legal quagmire of being obligated to sell your home to multiple buyers.
Finally, when a transaction has successfully closed and the title transferred, the home is SOLD. This is when the sale price becomes a matter of public record and everyone can find out how much a home sold for. This record becomes a legitimate value basis of future sales and appraisals in the neighborhood. A low sale can hurt the neighborhood value. A high sale can help increase the value.
Okay I will stop here. As always, keep sending me your real estate questions.
Until next month, take care!
Yet another year has come to an end. We hope 2015 was a good and memorable year for you. As we enter 2016, we wish you the full optimism, energy, and momentum that comes with the arrival of a brand new year. We want to encourage you to create a New Year’s Resolution in writing. It’s been proven that when goals are written down, you have a much higher chance of achieving them. We hope you will achieve all your goals and realize all your dreams in 2016!
Here are some suggestions for consideration in your real-estate related resolutions:
These are just some ideas for real estate goals we’ve shared in the past. We have more! Happy New Year!
As always, if you have any real estate related questions, give us a call! We are your neighbors and happy to discuss real estate even when it’s not business.
Also, we love referrals!
Until next month, take care!
Happy December! We want to wish you a very happy holiday season. May it be filled with joy, warmth, and goodwill.
We want to thank you for your trust and support this year. We helped over 90 families with their home purchases and sales this year. In 2015, many of our clients have upsized, downsized, bought a first home, relocated, bought an investment property, or sold an investment property. Whatever the purpose and reason, we are honored to have been a part of the journey. Each and every journey we took with clients was special and memorable in some way. We believe in home ownership and real estate investment. We are grateful to have been entrusted to be the guides in achieving your real estate goals.
Looking back in 2015, the Orlando housing market continued its stability. The chart below shows the 3-year history of housing inventory level (number of homes for sale). As you can see, 2015 is the highlighted portion. It was very stable and fluctuated within a very narrow range of just a few hundred homes.
When you read national news, you may see descriptions of inventory tightening, not here. You can see the inventory buildup in 2013 and 2014 but leveled off in 2015. The roller coaster years are behind us now. As a result, the prices have also been stable with a mild positive trend. This positive trend is not across the board. Let us know where you are looking and we will evaluate the local trend for you.
The interest rates in 2015 also remained stable within an average range of about 3.67%- 4.08%. This was lower than what the industry projected, which contributed to the robustness of the housing market in 2015. Buyers did not wait on the interest rates though. Instead, individuals’ circumstances were the main determinants of timing in this market. There weren’t a lot of external factors that significantly swayed things one way or another, so people tended to make the move when they were ready without waiting for a particular event.
The biggest change in real estate transactions in 2015 was probably the implementation of the Federal TRID mortgage rules in October. Although much feared, with the proactive preparation all year long, it has been smooth sailing so far. It does take longer to close a loan now, but we see a sliver of hope on the horizon that we may be able to reduce the time frame through tight team work.
I will continue to report housing market conditions to you as we enter the coming New Year. At this point, 2016 is projected to be another stable year in the Orlando real estate market. Interest rates are expected to move above 4% and gradually into the high 4’s. We have been there before. Please see the mortgage rate chart above from mid-2013 through 2014. Higher interest rates do decrease purchasing power, but at these historically low levels, we hope they will not diminish market demand.
I’ll stop here. We sincerely wish you a truly wondrous holiday season. May you enjoy the fruits of your labor and the warmth of loved ones in the remainder of this year.
Another year is near its end. We hope you had a good year with more ups than downs and more joy than sorrow. As we approach Thanksgiving at the end of this month, we hope you have plenty to be thankful for with your family and loved ones.
So far in 2015, 79 homes have sold in Stoneybrook (end of Oct), at prices ranging from a low of $180,000 to a high of $645,000. The hypothetical “average home” was a 4 bedroom/3 bathroom with 2579 Square Feet of living space and sold for $305,543.
In 2014, 76 homes were sold in Stoneybrook at prices ranging from a low of $168,000 to a high of $575,000. The “average home” was a 4 bedroom/3 bathroom with 2599 Square Feet of living space, and sold for $290,557.
So the average price for the average home in Stoneybrook increased 5% this year. Statistics aside, each home sale or purchase is unique, because no two homes are exactly alike, and no home sellers or buyers are exactly alike. If you are thinking about buying or selling a home, give us a call. We will break down all the numbers and the sometimes conflicting market news, to provide you clarity on what’s really going on.
Overall it’s been a better year for most of Orlando as well. The Orlando housing market is flirting with a market top but in a very healthy and stable way. If you are looking outside of Stoneybrook, also be sure to understand what the area and community’s micro-market is indicating. Don’t settle for averages and generalities, consult with a specialist. We are the market leader in Stoneybrook, but for every home we sell in here, we sell 7 homes elsewhere. Our expertise is throughout Central Florida. If you have any questions about real estate, give us a call. We are happy to discuss any and all real estate matters with our neighbors.
Happy November! We hope you are enjoying the beautiful weather. Another year is near its end. We hope you had a good year with more ups than downs and more joy than sorrow. As we approach Thanksgiving at the end of this month, we hope you have plenty to be thankful for with your family and loved ones.
October is one of the slowest months in the Orlando real estate market. The ending of the summer peak season is now clearly felt, yet the holiday season traffic hasn’t started yet. This is expected and normal. Overall, 2015 has been a good year for most of Orlando housing market. It is flirting with a market top but in a very healthy and stable way. Every 6 months or so, the market shifts in some subtle way. As we seem to always say, “next year will be a very interesting year!”
This month I’ll change pace a bit and share a conversation I had with Dustin Owen of Waterstone Mortgage. Over the last few years, one complaint we’ve heard frequently from our homebuyers was that the process of getting a home mortgage was long and onerous. Dustin understands this sentiment and his comment is below.
“Often it is asked why there is so much paperwork mandated for a mortgage loan application when buying a home today. It seems that the lender needs to know everything about the applicant. It seems like three separate sources are required to validate each and every entry on the application form. Many buyers are being told by friends and family that the process was not this way when they bought their home 10, 15 or even 20 years ago.
Well, there are two very good reasons why the loan process is much more cumbersome for today’s buyer than perhaps any time in history.
– Reason #1: The government has set new guidelines that now demand that lenders prove beyond any doubt that the applicants are in fact capable of affording the mortgage. During the boom in the housing market, many Americans “qualified” for mortgages that they could never pay back. These buyers qualified because regulation supported lackadaisical underwriting standards. This led to millions of families losing their homes. The government wants to make sure this can’t happen again.
– Reason #2: Lenders do not want to be in the real estate business. Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures. In addition to the foreclosures, they had to negotiate another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application. The lenders realize they need to help the average consumer make better financial choices.
However, there is some good news. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed recent home buyers to obtain a mortgage interest rate in the 3% to 4% range. The friends and family who bought homes ten or twenty years ago experienced an easier mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of <4%, they would probably bend over backwards to make the process much easier. A view from the glass half full…instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.”
I hope you enjoyed this perspective from a lender.
If you are thinking about buying or selling a home soon, the holiday season provides unique advantages for both. Give us a call or send us an email, we will tailor a personalized strategy to help you meet your real estate goals.
Until next month, take care!
How time flies. We are now in the last quarter of 2015! As the weather cools, so does the traditional real estate market in Orlando. The remainder of 2015 will be an interesting time for real estate transactions, as the entire industry prepares to embrace the implementation of the new federally mandated Truth in Lending/RESPA integrated Disclosure (TRID) rule on October 3, 2015.
This new rule profoundly affects the way lenders provide loans to homebuyers. Although the way homebuyers purchase from home sellers are not fundamentally changed, the lending process is sufficiently changed to warrant a revision of the standard residential real estate contract for sale and purchase. This new contract (FR/BAR-4) goes into effect September 28, 2015.
The most significant change to a transaction is the time it will take to consummate a loan/sale. In the past it was common to complete a loan in 30 days, and close shortly after. Now the standard time frame for obtaining a loan is extended to 45 days, with potential closing extension of 10 additional days for compliance with the new rule. Essentially, buyers and sellers can now expect a wait of about 2 months to complete a sale.
This is a significant amount of time in an age where technology has shortened the time frame for many of our endeavors. We now prepare sellers that if we get their home under contract in one month, they still have to budget a 3-month overall window before the sale is completed. That’s ¼ of a year in an ideal scenario!
Of course, the same goes for the homebuyers as well. Assuming we help the homebuyers find the dream home in one month, it will be 3 months before they will move in. So we may naturally start the process a bit earlier than before.
As market leaders, we are well prepared for the coming changes. We will be preparing our buying and selling clients accordingly in this new environment.
Enjoy your October. As always, if you have any questions about real estate, give us a call. We are happy to discuss any and all real estate matters with our neighbors.
Until next month, take care!
It’s finally September! Kids are back in school. Hopefully the weather will cool off soon. It sure has been a hot and humid summer. With Hurricane Danny, the first major hurricane of the season, and Tropical Storm Erika behind us now, I will discuss how hurricanes can affect real estate transactions.
First, once a named tropical storm enters a predetermined geographic boundary around Florida we call the “box”, home insurance companies will suspend the writing of new policies. This makes perfect sense of course. They are not in the business to underwrite new policies or increase coverage right as a hurricane is “at the door”. The effect of this suspension is that without insurance coverage, the mortgage company will not issue the loan. So during active storm season, it’s important for a buyer to secure home insurance early during the transaction, so there is no delay of closing. The FR/BAR-3 Residential Contract for Sale and Purchase has an automatic 3-day closing extension under such circumstance of insurance suspension or disruption of utilities. After up to 14 days, the contract may be terminated.
Generally speaking, the suspension of new insurance policies is temporary and coverage is resumed as soon as the storm passes. The situation that no one wants to see, of course, is a storm causing actual damages to the home while it’s under contract for sale and purchase.
Regardless of what stage the sale and purchase contract is in, the Seller has a contractual obligation to maintain the home in the same condition as it was when the contract was signed. Therefore, any storm damage is the Seller’s responsibility. The “Risk of Loss” clause provides for the solution in such situation.
Memories of the 3 hurricanes that hit central Florida in 2004 are still vivid in some of our minds. The Risk of Loss clause provides for the termination of the contract if the cost of restoration exceeds 1.5% of contract purchase price. So if a contract is for the purchase of a home at $300,000, the 1.5% threshold is merely $4500 worth of damage. Other than termination, everyone gets very busy with insurance, estimation of repairs, actual repairs, and escrow arrangements in the event the repairs cannot be completed. It’s a complicated mess that I certainly hope we will not see again anytime soon.
Enjoy the upcoming fall season, stay safe. If you have any questions about buying or selling a home, give us a call. We love talking real estate.
Until next month, take care!
In the blink of an eye, the summer break is almost over! In a few more weeks schools will start back up again. We hope you fully enjoy the beautiful (and hot) month of August.
This month, let’s talk about residential real estate contracts. When we are buying and selling homes, the written agreement is the sales contract. The contract governs the transaction and provides for the rights and obligations of the buyer and seller. It is legally binding once signed by both parties. The understanding of the details is crucial for the success of a transaction.
Real estate agents do not have the training or the license to draft contracts. Only licensed attorneys can do that. What we real estate agents use are standard contracts created by trade groups, then approved by the Florida Supreme Court for use by non-lawyers.
In Central Florida, the prevailing contract is the FR/BAR contract Version 3. This contract is created by the joint efforts of the Florida Realtors Association and the Florida Bar Association and named accordingly.
There is also the CRSP contract Version 13. CRSP stands for Contract for Residential Sale and Purchase.
These contracts have important differences throughout. Here is a simple example: in the CRSP contract, washer and dryer are included in the sale. In the FR/BAR contract, they are not.
The contracts are revised every time there are law changes or transactional updates. For example, the FR/BAR contract version 4 is in the works now to (hopefully) comply with and reflect the consequences of the implementation of the new federal TRID rules.
If you work with real estate agents, make sure they understand these contracts and keep up with the latest revisions. They are your representatives in contract negotiation and contract management. Your rights and obligations are governed by these documents that you sign. It’s important you understand the details and nuances so you are not surprised later.
If you are thinking about buying or selling a home and would like to talk about these matters, please give us a call. We love to talk about real estate!
Until next month, take care!
Happy July! We are at the half way point through 2015. So far this has been a very robust and healthy market. Lots of homes have been coming on the market (averaging 4,269 new listings per month) and lots of homes have been sold (averaging 2,753 homes per month). Homes that are less than ideal or overpriced do exit the market through listing expiration or withdrawal. In balance, there is still a net increase in the number of homes for sale.
The chart below shows the month-to-month number of homes for sale by ORRA (Orlando Regional Realtor Association), going from the latest tallied data (May 2015) back for 3 years (May 2012).
As you can see, we have been holding steady in a range between 11,000 and 12,000 homes for sale. This speaks for the stability of the market. It does seem the inventory level is flirting with the 12,000 point again, but fluctuations are very gradual. Again, this is a great time to buy and a great time to sell. In a balanced market, neither side has one-sided leverage. You can really benefit from expert guidance on buying or selling. As when a market is stable, it is also competitive. Sellers are competing with other sellers, and the buyers are competing with other buyers. The guidance and negotiation skills of a good agent can definitely tip the favor towards you.
We are right in the middle of the peak season. Since the schools got out, buyers have been roaming the market. Relocation buyers are flying in every day to find homes. We expect this to continue through July and begin to slow down in August as schools start back up again.
Hope you are enjoying your summer. Until next month, take care!
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