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

References to articles, sources, products, or services are not a specific endorsement and not guaranteed to be true or accurate. You should perform your own “due diligence and investigate” whether the information provided is valid, or the product or service is right for you. I welcome any or all comments that would help others.

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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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What is an ALTA/NSPS Land Title Survey and why is it important in Real Estate Transactions?

In 25 words or less….or more:

Lenders won’t make loans for home purchases (hey – this is important even if you buy a property for cash) unless title is clean and title insurance policy can be issued on the property. This survey guarantees property can be insured.

However, it has been a recent practice for most lenders and closing attorneys in Georgia to require an “enhanced” level of title insurance be issued to cover losses and legal challenges for many of the possible disputes that a Land Survey would reveal. Therefore, many homes (except for new homes, larger lot sizes, and others lender identify) seldom require a land survey for lenders to make loans.

See my Blog Post on Title Insurance.

Source: ALTA/NSPS Land Title Survey

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Spray Foam Bad for Termite Control

Why does spray foam insulation interfere with termite control?

Spray foam insulation unfortunately provides termites with a dense, spongy place to build their colonies, and it is very easy for them to tunnel through. It does not attract termites, but it does provide them a nice home if they find it.

Homes ravaged by termites hidden behind spray foam insulation

According to the pest control operator who provided the Fox 5 I-Team with video of this case, the spray foam in this two-year-old house is now home to termite tunnels going 15 feet up.

Improperly Installed Spray Foam Insulation Could Impact Ability to Inspect for Termites. Homeowners who have spray foam insulation currently installed in their home and have a pest control contract for termites should contact their pest control company to review their contract.

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Real Estate Open Houses – Good or Bad idea?


Reason it’s a bad idea (Hint: Theft!): One arrested in connection with thefts from real estate open houses in Kennewick

Only 3% of buyers visited open houses according to the 2018 Home Buyers and Seller Generational Trends Report published by the National Association of Realtor.

About 45% of female REALTORS® and 25% of male REALTORS® have experienced a situation in the past year that made them fear for their personal safety or safety of their personal information

Safety is an on-going concern for real estate professionals whether you are sponsoring an open house or conducting a private showing of a property.

Source: A Sales Tool or a Magnet for Trouble & Common Sense Tips for Safe Open Houses

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Failure to Double-Check Your Work Could End in a Lawsuit

A lending institution engaged a real estate broker to list and sell residential property that went through the foreclosure process after its owners defaulted on the mortgage.

Situation: A lending institution engaged a real estate broker to list and sell residential property that went through the foreclosure process after its owners defaulted on the mortgage. As instructed, the broker arranged to have an asset management company “trash out” and dispose of the contents by sale or destruction. A for sale sign was then placed in the yard and the lock on the front door was changed. Problem: It was the wrong property.

Source: https://eo.pearlinsurance.com/acton/attachment/21966/f-aec890d4-7bae-423d-84f8-f2966c1ab983/1/-/-/-/-/Pearl-Insurance-Realtors-EO-Risk-Manager-March-2019.pdf?utm_term=192151-XL-EO-INT-E-MAR&utm_campaign=192151&utm_content=192151-XL-EO-INT-E-MAR&utm_source=Act-On&utm_medium=Email&cm_mmc=Act-On%20Software–email–James,%20Your%20E%26O%20Risk%20Manager-_-READ%20NOW&sourceCode=182028-XL-EO-INT-E-NOV&refer=Act-On&sid=TV2:BYulMqhAq

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Mortgage Calculators


I found these on the web through different source and I am not sure how much use they will be or the simplest or you to use, but don’t feel obligated to use any services advertised on this website. I will also continue to post any others I encounter.

Simple mortgage calculator from Kim Komando – http://amortizationloancalculator.net/index.php

Realtor.com offers a mortgage calculator – https://www.realtor.com/mortgage/tools/mortgage-calculator/

Various mortgage calculators –  http://www.calculators4mortgages.com/

Determination to refinance an existing mortgage – http://www.bills.com/calculator-mortgage/

Zillow.com offers a mortgage calculator – http://www.domania.com/Calculator/default.aspx

Helpful tips and mortgage calculator – http://www.mtgprofessor.com/home.aspx

Lending tree (careful – you may get alot of ads) – http://www.lendingtree.com/mortgage-loans/calculators/loan-payment-calculator/

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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Georgia Landlord-Tenant Handbook (Georgia laws regarding residential rentals)

Do you know your rights as a landlord? As a tenant?

The Georgia Landlord-Tenant Handbook addresses each parties rights for residential rental properties.

For example:

Please see one of my related blog posts: Are tenants liable for HOA fees?

References to articles, sources, products, or services are not a specific endorsement and not guaranteed to be true or accurate. You should perform your own “due diligence and investigate” whether the information provided is valid, or the product or service is right for you. I welcome any or all comments that would help others.


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Are You at Fault? Developing Procedures Could Save You from Litigation

Source: From Pearl Insurance E&O Risk Manager

When an agent and broker partner together for a transaction, it’s extremely important for both parties to do their own due diligence. Because even if you don’t directly make the mistake, you could still be at fault. This actual scenario teaches us two lessons. First, don’t falsely advertise your expertise or claim you know an area of real estate that you don’t. And second, when working with another party, make sure you develop procedures and ask questions to prevent a lawsuit from occurring.

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