Real estate transfer taxes – taxes on residential home sales transactions by state and local governments

Listen to my podcast here about Transfer Taxes spreading through the United States and possibly through Georgia.

Update: 10-12-2019: What is a ‘transfer tax’ and other real estate questions answered

This is a renewed topic from my previous 2013 blog post on Transfer Taxes and a more recent article: Opinion The emergence of local real estate transfer taxes

I once searched the reason for Transfer Taxes in the state of Georgia and a former definition I saw on a Georgia government website was a reference that “since it is a privilege to sell property in Georgia, we’re gonna tax you.” Since then, the website has been modified. Also, transfer taxes can be levied at the federal, state and local levels, depending on the type of property being transferred.

In Georgia, the state charges a transfer tax of $1 per $1,000 of sales price (i.e., $300 based on sales price of $300,000) of every residential real estate transactions to one party (either Buyer or Seller – which is negotiable even thought the standard GAR contract states the Buyer will pay the cost, but is still negotiable) of the transaction. Basically, the transfer tax (not to be confused with the Georgia Intangibles tax) is another tax – but instead of just being charged on certain real estate transactions, it’s charged anytime a real property is transferred to another owner.

I’m not sure what the transfer tax feeds in Georgia – it may be that it helps to finance Georgia’s investigations into mortgage fraud or the Department of Banking and Finance who oversees lenders, mortgage brokers, etc.,. Or if it just gets rolled into the General Fund used to pay for other unrelated things…such as golf outings or Christmas parties.

Based on the article mentioned above, local governments are now getting the idea to charge transfer taxes themselves in addition to any state transfer taxes. So far in 2019 about a dozen localities — mostly in high-volume, high-population states — have adopted their own local real estate transfer taxes. Will Atlanta or its metro area local governments start charging new transfer taxes to generate tax revenue? Time will tell.

Here is a list of 2017 Transfer Taxes per state.

Here is the National Conference of State Legislatures NCSL Table of Real Estate Transfer Taxes per state.

Source:  http://www.siouxcityjournal.com/advertorial/siouxland_homes/the-scourge-of-real-estate-transfer-taxes/article_068062db-3bb1-5f25-9b18-17f5574bdd0f.html

COMMENTARY: Hike in property transfer tax detrimental to Delaware>/a>.

Real estate market slowdown may impact land transfer taxes.

Real Estate Transfer Taxes per state.

The community of St. Helena, California is debating many options to raise revenue for road, sidewalk and park maintenance. One favorable option is a Real Estate Transfer Tax of 1% on the sale of homes. Although I agree that if roads need maintenance, local residents should be willing to pay for that maintenance. But as for the true cost of maintenance and other improvements, it may not be so clear. Please read my post on Sidewalks – do we really need them?

Good luck Frederick, MD, but I think you’re screwed – transfer tax will be implemented and at least the cost is shared equally between Buyer and Seller – in Georgia, it’s charged to the Buyer. Source: http://www.fredericknewspost.com/news/economy_and_business/business_topics/real_estate/article_e7a50470-7b93-5776-9cff-d71079b6129c.html?mode=jqm

Michigan is challenging Fannie Mae and Freddie Mac for millions of $ in unpaid transfer taxes on foreclosures and taking their fight to the US Supreme Court. Source: http://www.freep.com/article/20130520/NEWS03/305200113/Oakland-County-vows-take-fight-real-estate-tranfer-tax-fight-Supreme-Court

Five states do not impose this tax – Mississippi, Missouri, New Mexico, North Dakota, and Wyoming.

Bottom Line:  States, as well as federal and local government authorities are constantly looking for ways they can increase tax revenue to fund operations…the question is, will the proceeds collected cover the directly related expenses that authority expends to administer or enforce related real estate activities, or be just another hidden tax?

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

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Office of Georgia Insurance & Safety Fire Commissioner

Listen to my podcast on this subject.

The Office of Insurance and Safety Fire Commissioner licenses and regulates insurance companies; ensures that insurance rates, rules, and forms comply with state law; investigates suspicions of insurance fraud; and conducts inspections of buildings and houses to prevent fire outbreak.

However, here are some detailed duties and resources that may be of interest to you.

Consumer Services Division of the Commissioner investigates policyholder complaints and responds to inquiries from the public. Our goal is to answer insurance related questions promptly and to ensure fair and equitable resolution of disputes involving insurance transactions between insurers, agents, and policyholders. Consumer Complaint Comparisons for Auto, Home, Life and Health Insurance.

Hundreds of Georgia consumers have reaped the benefits of Insurance Commissioner John F. King and the National Association of Insurance Commissioners’ (NAIC) Life Insurance Policy Locator during the locator’s first year. The free consumer tool has matched 3128 Georgia beneficiaries with lost or misplaced life insurance policies or annuities returning $40,798,883 in unclaimed money to those consumers. Check out this link to the Life Insurance Policy Locator Services website to search for unclaimed insurance proceeds. The NAIC link just mentioned can assist consumers in locating life insurance policies and annuity contracts of a deceased family member or close relationship.

Visit the website of the Georgia Insurance & Safety Fire Commissioner to research this source of information most Georgia citizens or residents never have seen….

Different Related news topics include the following:

Fraud News:

These are cases in any county in Georgia that’s related to fraudulent activity related to any type of insurance – Auto, Home, Life, insurance-related investments, etc… Georgia Fraud Investigation Division made 49 arrests in various cases so far in half of 2019 in Georgia.

The Fraud Investigations Division investigates illegal insurance activities that are perpetrated by companies, agents or individuals. Agentsof the Fraud Investigations Division cover a wide variety of crimes and fraudulent schemes. The Fraud Investigations Division also investigates regulatory and administrative allegations of violations of the insurance code, and thereby assists the Department’s Legal Division in protecting Georgia consumers.

How to Report Suspected Insurance Fraud in Georgia

Insurance News:

In the first six months of 2019, the Georgia Department of Insurance responded to 5,688 consumer complaints and inquiries, returning more than $3,000,000 in insurance claim payouts to many of these policyholders. In addition to the money returned to consumers with assistance from the Consumer Services Division, the call center at the Georgia Department of Insurance took52,300 calls in the first half of 2019.

The top five categories of complaints from consumers were:

  • Denial of claim or delay in claim processing
  • Private passenger auto
  • Unsatisfactory settlement offer
  • Individual accident and health
  • Homeowners

Consumers with questions about their insurance claim or policy provisions can call the Department’s Consumer Hotline at 1‐800‐656‐2298 or file a complaint online at https://www.oci.ga.gov/ConsumerService/Home.aspx.

Safety Fire News

This category has news stories about Fire Safety news. This link reflects many arson investigations for Counties throughout Georgia.

Directives:

This link provides Insurance Commissioner issued Directives to insurance companies and official Georgia agencies how to handle insurance claims matters from major storm events and other events affecting all of Georgia and not necessarily any one county. For example, waivers/leniency of insurance premiums due to Hurricane damage; government shutdowns; directions for all insurance companies underwriting auto and homeowner’s insurance in the State of Georgia, what rules all insurance companies have to follow if they sell insurance policies in Georgia, etc,.

Bulletins:

These Bulletins issued by the Insurance Commissioner have dirfferent topics such as:

Public Adjusters, Roofing Contractors and Homeowners – Illegal Offers to Waive or Rebate Homeowners’ Insurance Deductibles – Some roofing contractors operating in the State of Georgia are offering to waive or rebate homeowners’ insurance deductibles — Unless you’re a licensed adjuster, you can’t offer to negotiate with an insurance company or file a claim with an insurance company on behalf of insured homeowners. Also, may a licensed public adjuster waive or rebate a homeowner’s insurance deductible? No!

Surcharges & Multivehicle Not-At-Fault Accidents – Addressed to all licensed property and casualty insurance companies in Georgia. O.C.G.A. (Official Code of Georgia – i.e., Georgia Law) §33-9-40 clearly states that “no insurer shall surcharge the premium or rate charged on a policy of motor vehicle insurance…as a result of the insured person’s involvement in a multivehicle accident when such person was not at fault in such accident.” The statute does not differentiate between new and renewal rates.

I urge you to visit the Georgia Insurance Commissioner’s site at oci.ga.gov and look around…you may gain a better understanding of fraudulent activity you need to be aware of as well as rules for insurance companies and other contractors to protect your interests as a consumer.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

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Things Real Estate Agents Don’t Want You to Know

Please listen to my Podcast on the subject as well.

  • Does your agent have what it takes?
  • Real estate agent commission negotiable?
  • Conflict of interest?
  • Should you use a “buyer’s agent”?
  • Do you need an agent to buy or sell a home?
  • Financial interest of your agent?
  • Do you trust your agent’s references or reviews
  • Beware of any details of your contract with the agent
  • Do you know the home inspector?
  • Open house – pro or con?
  • Well known agents are usually busy and their attention to you?
  • Should you even buy a home or sell yours?

Source of inspiration for blog post: 13 Things Real Estate Agents Don’t Want You to Know

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Should anyone profit from real estate?

Please visit my Podcast on this subject.

Thanks to Bernie Sanders, this topic is pretty interesting. His question:

Should People Profit From Housing?

If we think government is a solution to free market ups and downs, you are seriously mistaken. The profit motive drives all of us (including socialist leaders and dictators who stay in power down to home buyers and home sellers)…to offer goods and services for their highest values motivates us all to acquire more money to get more things and other benefits. Investors are no different, they want a return in their money…that includes large and small investors alike.

I understand Bernie Sanders may be talking about high priced rental and housing costs in mega, highly congested cities of Democratic control (San Francisco, Chicago, New York, Los Angeles, Atlanta, etc), but he is just playing the old socialist wealth jealousy game here and pandering to those college graduates who didn’t get well paying jobs from their useless degrees. And if you’ve notice migration of company growth, they are moving away from the congested cities into more favorable Republican controlled cities and states that offer more affordable housing and employment for its residents.

The plan of iBuyers (large instant cash investor/buyers – see My iBuyer post on my blog and listen to my iBuyer podcast) is to capture at least 10% of the residential real estate market in the next few years. That represents 10s of millions of single family homes.

But talk about residential real estate disruption. Uncle Bernie’s plan could create significant turmoil in real estate by negatively affecting more than his intended targets (evil, greedy landlords and developers)….as any government plan to control something has proven.

First, iBuyers are scooping up potential homes that first time homebuyers can still buy, so inventory levels exist but at a lower level than if iBuyers weren’t there. But homeowners are also somewhat to blame since in exchange for a quick dollar (greed or convenience) they want to sell for about 10% less than the free market would pay in exchange for perceived convenience of quick closings and don’t have to make upgrades or changes to the property. Bernie’s plan would stop this greed of home sellers! But this also both diminishes and prevents wealth building through individual home ownership for some homeowners who are willing to buy homes and fix them up themselves. When iBuyers purchase the bottom 1/3 of prices of homes (easier to rent or flip since most in this price range are affordable to most home buyers) they fix them up (make improvements) and resell about 2/3 of them. That way home buyers still purchase homes, but upgraded and improved over what they “could have purchased” and they don’t have to put up with the contractors and disruption. A win-win for home buyers and investors. Message: Free market capitalism works.

Second, iBuyers generally purchase the lower 1/3 price range of homes which are the types of homes generally are most affordable rentals. If they control the inventory of homes for rent in their market, they can control rental rates in those markets. Is this bad? Yes, if there are few alternatives and if one investor purchase all homes in a rental market. But dozens of investors usually exist in each market and no one investor normally controls rents for very long (even though one investor purchased over 100 properties within a 3 mile radius of my home, several other investors purchased more). There is a lot of competitors in the marketplace when there is profit potential and rental rates vary based on alternatives in marketplace, return on investment each investor is seeking, location of property for rent, and several other factors. Message: Free market capitalism works.

Sanders also proposes a national rent control standard (the amount that landlords can raise rents) which lowers the profit incentive for investors to purchase homes to rent. This discourages property investments (less housing is generated thereby reducing supply not only creating a shortage of available places to rent, but thereby putting artificial upward pressure on rents that skyrocket once caps are removed). It also discourages investments for improvements/upgrades/repairs to properties (not as nice of homes on inside and out to live in). And it places artificial pressure on all landlords to raise the rents to the maximum allowed instead of allowing the free market to make the price decision. And basically, if investors can’t meet their profit goals, they can close the building (where do these residents go?) and sell it to a developer that will tear residential down and build something else…thereby reducing available housing for all. Message: Free market capitalism works.

Sanders also proposes a hefty tax on house flipping within five years of purchase. This is intended to curb rapid turnover of real estate for profit, but will curb the properties available for sale which in turn will boost prices even higher (and more unaffordable) due to low inventory and make more profit for investors on fewer sales. So when government tries to get involved, it screws up a market. If flippers continue to turn properties at lower prices and make profit yet low priced enough for first time home buyers to make their purchase, this boosts home ownership for individuals. Under Bernie Sanders proposal, more properties would be held as rentals and prohibit home ownership. Mr. Sanders’s proposal would also put a hefty tax on house flipping, hitting owners who sell a property for more than the original price within five years of purchase (for a place they don’t occupy). What about someone who closes on a home purchase and moves out of their current house before it sells? Someone who has put a property on the market and struggled to sell it for months might end up facing this tax. This makes little sense.

So like it or not, you need to really look at what Bernie Sanders is proposing. To limit the iBuyer acquisition of millions of homes, yes – this may limit their power over local zoning boards and lower priced homes and rental home market. So there is some merit to what Bernie is proposing, even though it’s socialistic and government controlled. The trouble is, many of these purchases are made by dozens of individual LLCs or other shell companies and then transferred over to iBuyers and thereby hiding their true identity until they own thousands and eventually perhaps millions of homes.

Bottom line: Bernie’s proposal may sound like a “sweet solution” to highly congested areas of today’s “unaffordable housing” issues, but digging deeper and following the proposals out to eventual results, it will significantly lower housing inventory and push rents as high as possible. Free market capitalism isn’t perfect, but it has a self regulating behavior. But when government gets involved with a anti-capitalism solution to a perceived problem, all kinds of troubles are created and legislatures continue to attempt to correct those problems (by adjusting existing or creating new legislation to chase issues that grow faster than they can catch up) that spawn from their initial involvement.

Source: Should People Profit From Housing? Bernie Sanders Says Yes, and No

Source: Campaign 2020: How to fix America’s housing policies

Source: In America today, corrupt real estate developers are gentrifying neighborhoods and forcing working families out of the homes and apartments where they have lived their entire lives and replacing them with fancy condominiums and hotels that only the very rich can afford.

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iBuyers – the good, bad, and ugly of their disruption of residential real estate markets

Listen to my podcast on the subject of iBuyers

The growing number and types of threats to limit the inventory and sales by residential real estate agents include, but are not limited to, (a) iBuyers (ie, “instant” cash buyers / investors who are well financed) scooping up thousands of homes before they hit the normal buyer market and either renting (estimated 1/3rd get rented) or selling them as flips; (b) people using Airbnb and other rental services to rent their properties for monthly income and not listing them for sale; (c) vast number of millennials with massive student loan debt, no desire to settle down, and lower paying salaries than they expected that can’t afford to buy the traditional “starter” homes ; (d) lack of adequate inventory of free market sales of the starter homes either prohibit people from listing their homes or turning to the iBuyers as the one option of unloading their property and moving; and (e) many homeowners who have simply realized that if they sell their homes for an inflated price, they would just have to find another home for a higher price in today’s market.

This blog post is just addressing the iBuyers (including, but not limited to Knock, Offerpad, OpenDoor, Zillow, Open House, Realogy, etc) that can be backed by billions of $ from venture capitalists in the US, Chinese Government or other foreign investors.

Bottom line in brief: iBuyers (now a multi-billion $ industry from Chinese investors to US venture capitalists) will offer you cash often based on similar or lower/older comparable sales, then charge a 6-10% fee, require you to also pay the total realtor sales commissions (anywhere from 4-8% in general), deduct costs for repairs/updates “they” (not you) demand to be performed by their contractors; won’t disclose anything about the house whether they know it or not; and require you to sign a document at closing that makes the property an “as-is” sale without any recourse or warranties of workmanship on any work performed in the home. Also, iBuyers promote the benefit of “picking your own closing date”. Well, that happens in a normal real estate transaction too…just the Buyers and Sellers negotiate the date and normally within 30 days of the contract effective date. And what about the Buyer not following through with the purchase? Well, the iBuyers also don’t guarantee they will close if they find too many updates or repairs or choose to back out as well and WILL charge you fees for their estimates and reviews. With good real estate agents and both Buyer and Seller stating on top of the lender, it rarely happens that transactions fall through on financing late in the game. Normally, it’s quite evident up front early in the process.

The Good: (1) Sellers find it convenient and quick (but at a steeply discounted net price from real market price); (2) for Buyers of flipped iBuyer homes, at least they can find more affordable housing (at an elevated price) that has been updated (but Buyers aren’t aware of the quality of those updates and are buying higher than normal to cover iBuyer return on investment); (3) for those iBuyers who turn the homes sold into rentals (although at an inflated rental rate due to lack of affordable housing inventory), it offers the renting public (i.e., those younger buyers who have huge student debt and can’t afford the purchase) a way to live in a community (good schools) and avoid apartment living; and (4) it pays off big for the venture capitalists buying the homes to get a discount on the buying side and a premium on the renting or selling side (i.e., very one sided game here).

The Bad: Normal home buyers in the lower end of the housing prices are usually 1st time homebuyers. In addition to the counter comments above (quality of updates; elevated rental rates; and huge student debt; , (1) They don’t have the opportunity to compete with a cash buyer since many sellers want a quick sale (i.e., cash-is-king) and no hassles of showing at inconvenient times, repairing things they live with, problems disclosed to them and now must disclose to others if deal falls through, and seeing strangers in their home. (2) Even listed properties are under contract so quickly from cash offers before normal Buyers have a chance to see them online and visit them to choose the right home (i.e., not many people buy sight unseen unless they first visit the home). As for sellers (in addition to steep discounted net price and (1) they probably could sell the home on the market for more purchase price; (2) they wouldn’t have nearly the number and types of repairs or upgrades since home buyers need living spaces and are much more negotiable on conditions than investors; (3)

The ugly: Sellers get screwed (for a 12+% discount (iBuyer fee plus realtor sales commissions on both Buyer and Seller side plus all iBuyer “required” repairs/upgrades ) selling their homes well below a normal market price, the net price at closing is lower than could have happened under a real estate professional’s marketing and guidance; Buyers get screwed, since they don’t have enough good inventory to choose or opportunities to buy low and sell high like investors; Real Estate Agents, get screwed by not legitimately representing their clients by protecting the Seller to get higher net sales proceeds and disclosure of all information about the house to the Buyers. iBuyers win: They call the shots in the deal and they’ll continue to bombard homeowners with the convenient, no hassle way to sell until the sellers catch onto their game and demand higher net proceeds from them or uses the real estate professional to sell their homes.

There are these and other signals to the residential real estate market that change and of historical patterns are causing significant disruption to the traditional buying, selling, and moving up marketplace and significant adaptation and marketing strategies are in the wind. Expect iBuying to continue in the near future because the money is there, investors want a return on it, and sellers sometimes like the easier and quicker way out and only to slap themselves on the forehead later when they realize they could have gotten more with less overall hassle…

Some recent articles on iBuyers:

Zillow Wants To Buy Your Home For Cash (And A Fee)… 3-5 years from now, they plan to be buying and selling 5,000 homes a month, which is around $20 billion/year in revenue.

Real Estate Right Now, what are iBuyer programs?

iBuyers are Here to Stay: How Tech has Adopted an Old Transaction Model and is Making it Better

iBuyers: Is The Convenience Worth The Cost?

The iBuyer Report (Preview)

Realogy expands iBuyer program, reveals cash backing for buyers

iBuyers are stealing equity from homeowners

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

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Real Estate Wire Fraud

Listen to my podcast on the subject

Coalition to Stop Real Estate Wire Fraud & Qualia Partner

Basically – in 25 words or less…. if homebuyers send closing funds to the wrong bank account, you get screwed! Don’t believe everything in writing. Pick up the phone and call.

Real estate wire fraud is a scam that targets individuals who make wire transfers during the home buying process. (Not to say that this scam doesn’t happen in other ways like spam emails and texts requiring immediate actions.)

In my opinion, home sellers, home buyers, and attorneys are indirectly responsible for this fraudulent “electro-criminal” behavior.

Historically, people could be trusted. Closing attorneys/offices would require you to get a certified check for the amount of money they estimated you needed at closing and if more was needed, they usually accepted personal check for up to a certain amount (i.e., normally $5,000). Hey, they knew where the property is located and if necessary, they can slap a lien on the property or send debt collectors to your home…

But based on dishonest Buyers that use high quality printers can produce fake certified checks. Also, Sellers fraudulently scammed a couple of real estate attorneys (by exiting the attorney office, photo depositing the check into bank account, and then going back into office asking for a wire transfer to their bank account without the attorney first cancelling the check…thereby double depositing funds and skating to Brazil or Costa Rica).

Now, to fight that fraudulent action, the closing attorney/office that is handling your real estate transaction will only accept wire transfers from your financial institution of your money you need at closing.

This now has created an environment to steal your money – electronically by your own actions.

The scam: The homebuyer receives an email from criminals pretending to be real estate agent, the closing attorney, or title agency involved in the transaction. The fraudulent email contains wire transfer payment instructions usually regarding the down payment or closing costs. Unwittingly, the homebuyer sends the wire transfer payment to the criminal’s account.

Criminals search out and compromise one or more email accounts belonging to the parties in the transaction. It’s a scam called Business Email Compromise or Email Account Compromise (BEC/EAC). In fact, the FBI reports that BEC/EAC bad actors are targeting the real estate sector.   Several factors contributing to the rise in real estate wire fraud:

  • Real estate transactions involve several different people and entities (including their computers, email accounts, and the servers they communicate through): attorneys, real estate agents and brokers, mortgage lenders, title companies, home service companies, home inspectors, buyers, and sellers. This gives the criminals multiple targets of hacking and spamming to compromise each entities security.
  • Criminals search Multiple Listing Services, as well as Zillow and Trulia for pending home sales. Next they identify and profile the parties. Because social media platforms, like LinkedIn, or Facebook, and publicly available websites, contain troves of information, this is quite easy. Homebuyers who are not adequately educated on the risk of real estate wire fraud.
  • Criminals know that buying a home is very emotional and once off balance, the homebuyer is more vulnerable and give attackers an advantage.  

Homebuyers can exercise some steps to protect themselves from this fraud:

  • First, acknowledge you are already a target for real estate wire fraud.
  • What should you do if you receive an email instructing you to make a wire transfer payment? Call don’t email: Confirm your wiring instructions by phone using a “known” number before transferring funds. Don’t use phone numbers or links from an email.
  •  Be suspicious: It’s uncommon for title companies to change wiring instructions and payment info by email.
  •  Forward, don’t reply: When responding to an email, forward it instead of replying and then type the previously “known” email of the requestor. Criminals use email address that are very similar to the real one for a company.
  • Confirm everything: Ask your bank to confirm the name on the account before sending a wire.
  •  Verify immediately: Call the title company or real estate agent to validate the funds were received. The sooner it is detected that money has been sent to a wrong account, the better chance you have of recovering the money.

What steps can the Agent take to protect their clients?

  • Warn Early & Warn Often: Make sure your clients know about the growing and looming threat of real estate wire transfer fraud.
  • Educate: Remind your client that you will not send changes to wiring instructions or payment information.
  • Call: Tell your client to call you to confirm all wiring instructions, and soon after they make any wire transfers.  
  • Create: Within your company establish a rapid response plan for wire fraud incidents.  

Source: Stop Real Estate Wire Fraud

Source: Real Estate Wire Fraud Has Devastating Effects

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Do 10 Year US Treasury Note yields have an Influence on Mortgage Interest Rates?

Listen to my Podcast on this subject.

Yes, they have been an influence in recent years. But first a little economics discussion, history and then some current events….

When people/institutional investors invest money to make more money, they want not only the amount they invested but a little something “extra” for their money (i.e., that little extra is a return). What yield means is the Rate (i.e., percentage) of Return (ROR) on that investment. In strong economic times, investments flow to more risky, higher yield (ROR) investments.  To entice people to buy US Treasuries, the US Government may drop their cost to you (i.e., discount to a lower price). But the opposite is true in uncertain and bad economic times.  Since more investors wants safer investments in those times, demand increases the prices of those “safer” investment choices of treasury notes.  So you can see, depending on investors beliefs of the direction and changes in the future of our economy, different thoughts on the safety of each investment choice is the investors main concern.

Note: US Treasury Notes are sold to people/institutional investors online at auctions through www.treasurydirect.gov. See the image below on the notes.

Over the past 20 years, based on changes in employment, housing crisis, and other demographic and economic events, fewer people have remained in their homes over a 20-30 year period like they had in the past. In fact, more households were moving on average every 7 years.  Now, due to housing crisis fears of mid 2000’s and other factors, that demographic as changed a little to people wanting to stay in their homes for at least 10 years. Therefore, it is common belief that the 10 Year Treasury yield  more accurately predicts the movement of fixed rate conventional 30 year mortgage loan rates.

So, the answer to my question is both: YES and NO

Answer = YES:  Over the past 20 or so years, yields on the 10 year US Treasury notes have moved in direction comparable to the fixed rate conventional mortgage rates. Based on this article from The Balance: How Treasury Notes Affect Mortgage Rates.  U.S. Treasury bills, bonds, and notes directly affect the interest rates on fixed-rate mortgages. How? When Treasury yields rise, so do interest rates. That’s because investors who want a steady and safe return compare interest rates of all fixed-income products. They compared yields on short-term Treasurys to certificates of deposit and money market funds. They compare yields on long-term Treasurys to home loans and corporate bonds. All bond yields are affected by Treasury yields since they compete for the same type of investor.

Answer = NO:  Based on Mortgage Daily News articles:  Yes, Mortgage Rates are Lower and 10yr Yields are Higher Today & No, Mortgage Rates Aren’t Based on 10yr Treasury Yields…True, US Treasuries set the tone for almost any interest rate in the US. – it’s their yield that runs point for most other comparative investments. But when economic events change there could be a lag or movement in opposite directions…which is what we’ve recently experienced now that mortgage rates moved lower and 10 Year US Treasury yields moved up.

So for now, I lean to the side of common thought that YES, 10 year treasury note yields DO predict or influence mortgage interest rates and the current marketplace factors is just an anomaly.

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Is the traditional residential real estate industry collapsing?

My podcast of this topic

If you search for residential real estate mergers and acquisitions in your favorite internet search portal, you’ll see many mergers are occurring.

We are seeing a drop on volume of “available” residential properties that agents can list for sale. This “shortage” of available properties that “Listing” agents can make available to purchase also hurts the “Buyer’s” agent on the other side of the transaction which severely limits the properties available for their “buyer” clients to purchase. I believe every market across the US is experiencing this problem.

Note: In case you’re asking, more than 95% of the transactions I’ve researched on the multiple listing services involve separate agents for both sides of each real estate transaction.

The growing threat of (a) iBuyers (ie, “instant” cash buyers / investors) scooping up thousands of homes before they hit the normal buyer market; (b) people using Airbnb and other rental services to rent their properties for monthly income and not listing them for sale; (c) vast number of millenniels with massive student loan debt, no desire to settle down, and lower paying salaries than they expected; and (d) many homeowners who have simply realized that if they sell their homes for a high price, they would just have to find another home for a higher price in today’s market….are all signals to the residential real estate brokerage companies that change and adaptation is in the wind.

One step of adaptation to this shrinking marketplace is through mergers and acquisitions of existing brokerage companies and consolidating the talent. This way, the brokerages can certainly keep and support the volume producers and the brokerage will survive, but what about those agents who don’t produce a lot of volume? Sure, they still hang in there, but the brokerage’s survival depends on the heavy lifters and preventing them from leaving the brokerage.

By merging two or more brokerages together, this better insures the survival of the brokerage at the expense of the low volume agent…which is basically capitalism and economic policies in action that will cause short term disruption in the 60,000-80,000 licensed real estate agents in Georgia (i.e., fewer properties to list, fewer agents are needed to list them).

Real Estate Office Mergers – information from the National Association of Realtors…One quick fact: 88% of firms reported that the number of mergers and acquisitions for the firm has remained the same from 2005 to 2010 and 2011 to 2017.

Millennials can’t afford real estate — destined to remain sad apartment dwellers

Some recent residential real estate company mergers and acquisitions

Merger mania… With pressure to stay competitive in an uncertain market, real estate firms (big and small) are scrambling to buy each other up at record rates …. REITs, residential and commercial brokerages and private firms alike are all hunting for companies to buy as a way to boost their bottom lines.

Another real estate merger: Red Oak buys East Bay rival Marvin Gardens

Better Homes and Gardens Real Estate Gary Greene merges with Heritage Texas Properties

Two of the largest real estate brokerages in Houston, Texas are merging

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Does FHA insure mortgages for nursing homes?

Yes…but, is this within the scope and purpose of the US federal government to insure mortgages for the construction or operation of nursing homes? How many FHA mortgages have been used to fund nursing homes and have there been any defaults of FHA loans to nursing homes? What other investment avenues are available to finance nursing home construction or operation?

$1 Million Penalty Brings Record Nursing Home Default Near an End… The federal mortgage insurance program has had few significant defaults in its nearly 50-year history, but a number of government watchdogs — including HUD’s own inspector general — have routinely warned that the department does not spend enough time monitoring the financial viability of nursing home owners and operators in the program.

SECTION 232 OF THE NATIONAL HOUSING ACT

Section 232 of the National Housing Act authorizes the Federal Housing Administration to insure mortgages made by private lenders to finance the development of nursing homes, intermediate care facilities, board and care homes, and assisted living facilities.

Section 232 Mortgage Insurance for Residential Care Facilities program and the Section 242 Mortgage Insurance for Hospitals

The Office of Residential Care Facilities (ORCF) manages the Section 232 program, which provides mortgage insurance for residential care facilities such as assisted living facilities, nursing homes, intermediate care facilities, and board and care homes. 


Section 232 may be used to finance the purchase, refinance, new construction, or substantial rehabilitation of a project.  A combination of residential healthcare uses is acceptable – e.g. refinance of a nursing home coupled with new construction of an assisted living facility.  The benefit to the lender is that the loan is insured by FHA.  The benefit to the borrower is that the loan is at a fixed interest rate, often lower than conventional rates, and is non-recourse.

SECTION 242 OF THE NATIONAL HOUSING ACT

Section 242 of the National Housing Act provides mortgage insurance for acute care hospital facilities ranging from large teaching institutions to small rural critical access hospitals.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

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Can You Answer These Top Five E&O Policy Coverage Questions?

Errors and omissions policy forms vary from carrier to carrier and all have their own list of exclusions.

Claims related to criminal, fraudulent, or dishonest act are normally excluded. Claims related to any type of liability which was assumed by the insured under a contract are also excluded. Another important exclusion relates to the insolvency or bankruptcy of an insurance carrier with which business was placed, unless such carrier had a certain AM Best rating when the business was placed (such as A- or better, or B+ or better). Other common exclusions include fee disputes, fines, penalties, sanctions, and disciplinary proceedings. You should always review the entire policy, including the actual exclusions and limitations, before binding your errors and insurance coverage.

While local or state laws may or may not expressly require some types of professionals to carry E&O coverage, other laws regarding their duty of care to clients make it a necessity. Additionally, you should seriously consider errors and omissions coverage if your business provides a professional service or regularly gives advice.

Here’s just a couple of the 5 questions:

I was showing a property and my client tripped and fell. Is that covered under my E&O policy?

Do I really need to protect my real estate firm against cyber theft and fraud?

Source: Pearl Insurance Risk Manager – 1Q2019

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