Tag Archives: David Reiss

Why Houses Don’t Sell

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photo by BriYYZ

I was quoted on Trulia in 8 Reasons Your House Isn’t Selling. It opens,

It’s a seller’s market in many cities across the U.S. If your home is in one of those cities, say Charleston, SC, or Colorado Springs, CO, and isn’t getting offers, something could be wrong. The good news? Knowing there’s a problem is the first step toward resolving it. However, there could be many reasons your house isn’t selling. We’ve asked real estate professionals and agents from all over the country what those top reasons might be — and they’ve provided some sound advice on how to remedy each situation.

1. You’re overconfident

Being in a seller’s market might mean that your home will get snapped up for premium price, no matter its condition. But that isn’t always the best strategy to count on. “Sometimes homeowners and agents get overconfident in a seller’s market and get lazy about ‘Home Selling 101,’” says Sep Niakan, broker and owner of HB Roswell Realty in Miami, FL.

Solution: Be realistic from day one. Although you may love your house, brace yourself for it to potentially sit on the market for quite some time. And no matter the market, it’s still important to “position your home to sell well,” says Niakan. “What does that mean? Staging, staging, and more staging.

2. The house is priced too high

Classic supply and demand conditions come into play in a seller’s market: There’s high demand, yet low supply. Therefore, you can usually expect to get more money for your home. But that doesn’t mean the sky’s the limit when it comes to your listing price. “In a seller’s market, a seller may feel comfortable pushing the asking price a bit higher, and this can be a huge mistake,” says Chase Michels of Brush Hill Realtors in Downers Grove, IL. “Determining the best asking price for a home is one of the most important aspects of selling a home. If your home is listed at a price that is above market value, you will miss out on prospective buyers.”

Solution: Make sure that you and your agent are certain of the value of your home in your market and price it right. “Get an analysis of the local market with a professional agent, solid comparables, and specific market trend data,” says Jill Olivarez, a Miramar Beach, FL, real estate agent.

3. The home needs some TLC

It can be a bitter pill to swallow to pay for home improvements that you may not enjoy for long. But if you want to sell for full asking price, you might need to get your house in a condition that warrants it — and not base this number only on price per square foot. “Retail buyers understandably still want the most house for their money,” says Barbara Grassey, author of How to Sell Your House Fast in a Slow Market and founder of the West Florida Real Estate Investors Association.

Solution: “The seller should have amenities comparable to other properties for sale in that price range and should really upgrade certain amenities,” says Grassey. Some upgrade examples, she says, include a pull-down gooseneck faucet, an upgraded ceiling fan, a double-bar towel rack, or upgraded door handles. They sound simple, but a few small changes can make a big impact.

4. There’s a problem with the title

“Title” in this case doesn’t mean the cute name you might have given your place (“The Laurels,” “The Conners’ Corner Cottage,” etc.). Rather, it’s the document that shows ownership. “One reason a house won’t sell is because there is a problem with the title to the house that spooks buyers,” says David Reiss, law professor at Brooklyn Law School in Brooklyn, NY. Here are some examples he gives of title problems:

  • Conveyance without a recorded deed (can sometimes happen in transfers between family members).
  • A paid-off mortgage that is still showing up as a valid lien on the house.
  • A mechanic’s lien that was filed for work done on the house by a subcontractor.

Solution: “Some [title] problems just require a little time to resolve,” says Reiss. Contact the title company to find out what you need to do to prepare for selling — then do it.

The Fed’s Effect on Mortgage Rates

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Federal Open Market Committee Meeting

Federal Open Market Committee Meeting

DepositAccounts.com quoted me in Types of Institutions in the U.S. Banking System – Investment Banks and Central Banks. It reads, in part,

Central Banks

Think of the central bank as the Grand Poobah of a country’s monetary system. In the U.S. that honor is bestowed upon the Federal Reserve. While there are other important central banks, like the European Central Bank, the Bank of England and the People’s Bank of China. For now, focus stateside.

Think of the central bank as the Grand Poobah of a country’s monetary system. In the U.S. that honor is bestowed upon the Federal Reserve.

The Federal Reserve was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law. To keep it simple, think of the Fed as having responsibility in these four areas:

  1. conducting the nation’s monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices;
  2. supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers;
  3. maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
  4. providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions, and playing a major role in operating and overseeing the nation’s payments systems.

You need look no further than the Federal Reserve FAQs to learn more about how it is structured.

The Federal Reserve may not take your money, but be clear it has much financial impact on your life. Brooklyn Law Professor David Reiss gives one example, “The Federal Reserve can have an impact on the interest rate you pay on your mortgage. Since the financial crisis, the Fed has fostered accommodative financial conditions which kept interest rates low. It has done this a number of ways, including through its monetary policy actions. The Federal Reserve’s Open Market Committee sets targets for the federal funds rate. The federal funds rate, in turn, influences interest rates for purchases, refinances and home equity loans.”

Millennials and Homeownership

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photo by flickr@tonywebster.com

TheStreet.com quoted me in Millennials Are Accruing Less Debt, Bypassing Homeownership. It reads, in part,

Millennials are accruing less debt than their counterparts did back in 2003 — despite being saddled with large amounts of student loans — because they are putting off buying homes.

The research conducted by Torsten Sløk, a Deutsche Bank international economist, shows that Millennials, ages 25 to 35, attained less debt in 2015 than their counterparts did in 2003. The data demonstrates a 29-year old in 2003 had an average debt amount of $41,761 compared to $36,810 in 2015 or a 33-year old owed $56,859 in 2003 and $52,640 in 2015.

“It is an urban myth that the young generation today is more indebted, it is the older generations that have higher debt levels,” said Sløk in a research note. “The reason is that since 2009, it has been difficult for Millennials to get a loan. As a result, 25 to 35 year olds today have less debt than in 2003.”

Debt has been “harder to obtain” for Gen Y-ers whether they are credit cards or mortgages, said Jim Triggs, a senior vice president of counseling and support of Money Management International, a Sugar Land, Texas-based non-profit debt counseling organization.

“Millennials have not been inundated with easy to obtain credit cards like in past years,” he said. “Creditors are not on college campuses offering credit cards to college students any longer.”

While Millennials are saddled with record levels of student loans because of the skyrocketing costs of college tuition and the ease of obtaining these loans, Millennials “continue to have less credit card and mortgage debt than their parents and grandparents,” Triggs said.

The level of student loan debt is hindering borrowers ages 18 to 35 from paying for necessities such as rent, utilities and even food as 43% expressed this sentiment, according to the National Foundation for Credit Counseling’s 2016 consumer financial literacy survey, said Bruce McClary, a spokesman for the Washington, D.C.-based national non-profit organization.

“There is a staggering amount of student loan debt and it is a burden for many,” he said.

Homeownership Delays

Although Millennials have expressed the desire the own a home in the future, they are keen to keep renting in part because many of them switch jobs frequently, have not amassed a down payment or do not want the financial commitment. The zeal to pursue the “American dream” of owning a home has waned.

*     *     *

The assumption that home values would rise faster than other investments has been challenged since the Great Recession, said David Reiss, a law professor at Brooklyn Law School.

“One big issue is the role that home ownership plays in wealth creation,” he said. “The bottom line is that homeownership can help build a nest egg for retirement, but long-term trends and individual decisions about homeownership will have a big impact as well.”

Tax Refunds Into Mortgage Payments

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photo by 401(K) 2012

TheStreet.com quoted me in Investing Your Tax Refund Instead of Spending It Boosts Retirement Savings. It opens,

Ramping up your emergency cash fund or IRA with your tax refund is a better option than spending it on a new smartphone or vacation.

Three out of four taxpayers received a refund of $3,000 in 2015. Although many consumers look forward to this windfall each year, it is not a “cause for celebration,” said Joe Jennings, a wealth director for PNC, a Pittsburgh-based financial institution.

“If you are receiving a large refund check, it actually means that you have loaned money to the government throughout the year and the next year the government is paying you back without interest,” he said.

Adjusting your withholdings is a good strategy if your refund exceeds $1,000. Changing the number of exemptions on your W-4 means you will net more income from each paycheck.

Bankrate.com, a North Palm Beach, Fla.-based financial content company, found that 31% of Americans who receive a tax refund this year plan to save or invest it. The survey revealed that 28% will use the funds to pay down debt, 27% will spend it on necessities like food/utility bills and 6% will splurge with a shopping spree or vacation.

Some consumers view the refund as a method of forcing them to save money each year or a way to pay down existing debt such as credit card balances with high interest.

Pay Off Existing Debt

Use your refund check to pay off as much as your credit card or student loan debt as possible since the amount of interest you are paying each month adds up quickly, said Jonathan Bochese, director of resolution services for Tax Defense Network, LLC, a Jacksonville, Fla.-based tax resolution company.

“The best use for any tax refund is to use it to pay off high interest revolving debts,” he said.

With the current low interest rate environment in money market funds and CDs, paying down debt is a no-brainer.

“If you can only make 3% on your investment and your debt is at a higher rate, pay off the debt,” said Carl Sera, a portfolio manager with Covestor, the online investing marketplace and managing principal of Sera Capital Management, a registered investment advisor in Annapolis, Md. “Don’t make it a habit to receive a tax refund, because it is money you have lent the taxing authority at a zero interest rate.”

Homeowners who do not have any other debt should pay down their mortgage by making an extra payment or two instead of stashing the refund in a savings account that is only receiving minimal interest, said David Reiss, a law professor at Brooklyn Law School.

“By doing so, you are making the equivalent of a pre-tax return of the interest rate on your mortgage,” he said. “If your mortgage has a 5% interest rate and your savings account has a 0.1% interest rate that is like getting a 4.9% higher rate of interest without taking any risk at all.”

Creative Credit Union Mortgages

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Credit Union

DepositAccounts.com quoted me in Types of Institutions in the U.S. Banking System – Credit Unions. It reads, in part,

What You Need to Know About Credit Unions

For more than 100 years, credit unions have been providing financial services to their members. Forget about what you thought you knew about credit unions. Long gone are the days when credit unions were seemingly only a “bank” for government employees. Today some 100 million Americans are member-owners of 6,900 credit unions and credit unions have more than $1 trillion in assets.

The Credit Union National Association (CUNA) defines a credit union as a non-for-profit, member-owned financial cooperative, democratically managed by its members, and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members.

Simply put — credits unions are about their members, not profits.

 *     *     *

How are credit unions different from banks?

“They are structured very differently. Credit unions don’t issue stock or pay dividends to outside shareholders, so they are not beholden to outside third party interests,” says Steve Rick, chief economist of CUNA Mutual Group, an insurer and maker of financial productions within credit unions.

Each person who holds an account is a member, and each member has one vote, “rather than the voices of only the powerful few stockholders heard at for-profit banks. And all earnings go straight back to members in the form of favorable interest rates and lower fees that other for-profit institutions can’t beat,” he adds.

Banks are governed by paid shareholders and voting rights depend on the number of shares owned. Earnings go to outside bond and stockholders in the form of dividends.

As cooperatives, credit unions are part of a broader cooperative community that shares philosophies around benefiting their member owners. One of the core missions of the credit union system is to educate its members on financial issues to ensure their financial health.

“It’s worth noting that credit unions can offer creative types of mortgages that should be explored by first-time and experienced homebuyers alike. The PenFed Credit Union, along with some other credit unions, has a 5/5 ARM that adjusts every five years. A product like this combines aspects of a fixed rate mortgage (fewer, but not the fewest) surprises about payment sizes, with aspects of an ARM (lower, but not the lowest) interest rates,” says David Reiss, a Brooklyn Law School professor specializing in real estate.

Buck-A-Home

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abandoned house

The Saint Louis Post-Dispatch quoted me (from an AP story) in Kansas City Presses To Sell Eyesore, Vacant Homes for A Buck. It reads, in part,

Drawn to the idea of buying a house for just a buck, Dorian Blydenburgh paced through the century-old digs in south Kansas City and didn’t mind tree limbs on the living room floor, holes in the ceiling and a funky mold smell.

“This is one everyone is gonna want, and there’s gonna be a fight for this,” said Blydenburgh, 56, a contractor looking at the three-bedroom, 1,500-square-foot house at 4124 Chestnut Avenue as a makeover prospect for a friend, who later applied to buy it. “Some of these places you need a bulldozer to fix, but this is doable. For a dollar, it looks like a go.”

That’s what Kansas City, Mo., officials were hoping to hear. The city and the Land Bank of Kansas City have offered 130 derelict, generally unlivable structures for sale for $1 each to those willing to make them livable again within a year. The buyer’s reward is an eventual $8,500 rebate — the amount it would have cost the city to flatten the houses.

*     *     *

But it’s buyer beware. Applicants must undergo a background check — applicants who are registered sex offenders or have drug-dealing or prostitution convictions are disqualified — and prove through bank statements or unused credit card limits they have at least $8,500 to devote to the rehab.

Ultimately, the program’s backers warn, rehabbing the properties might cost tens of thousands of dollars, perhaps involving installing or repairing roofs, electrical systems, plumbing, heating and air conditioning or foundations. And that’s beyond the cost of tackling troubling unknowns such as lead or asbestos.

“Most of those buildings on the dangerous list are going to have to come down. We know that,” Mayor Sly James said. “But there are other homes on that low level that could be salvaged, and we want people to know they are out there.”

Other cities have tried similar approaches. In Detroit, with the help of tens of millions of dollars from taxpayers, the city has torn down about 7,100 of an estimated 30,000 to 40,000 vacant houses since May 2014, with the mayor planning to have an additional 15,000 homes gone by 2018. More than 1,300 other homes have been auctioned, Detroit Land Bank Authority spokesman Craig Fahle said. Buyers of those properties, many fetching just the opening bid of $1,000, are required to bring the house up to code and have it occupied within six months — nine months if it’s in a historic district.

Chicago and Milwaukee have are unloading vacant lots. Chicago has sold more than 400 vacant parcels since 2014. In Milwaukee, homeowners next to a vacant lot can buy it for $1.

David Reiss, a Brooklyn Law School professor who focuses on real estate issues and community development, urges would-be buyers to understand the expenses beyond the price tag, including property taxes, upkeep and liability insurance.

“A house for a dollar may be an albatross around your neck,” he said. “I would look at it case by case. If it sounds too good, it probably is.”

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Silicon Valley’s Housing Crisis

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photo by Smitha Murthy

Drop in the Bucket?

Realtor.com quoted me in Could There Really Be Relief Ahead for Silicon Valley’s Housing Crisis? It opens,

Finally! A glimmer of hope has appeared in Silicon Valley’s housing crisis. Amid gloomy and downright terrifying stories about astronomical home prices and tighter-than-tight inventories forcing well-paid tech workers to live in vans, pay $2 million for a tear-down shack, or ponder commuting to work from Las Vegas, there seems to be some good news for a change: City Council members in Mountain View, CA, approved plans to build 10,250 new homes in the area.

Given that Mountain View has only about 32,000 homes total, this will increase its housing inventory by a whopping 32%—all purportedly within “walking distance” (possibly a bit of a long walk) of tech giant Google, which has long been lobbying on this front and will no doubt break out the Champagne once developers break ground. Sure, it may be years before these homes become a reality, but even the idea of them may have many locals (or those moving there) daring to dream. Might this new influx of housing cause home prices to drop within reasonable reach?

As logical as this renewed optimism about Silicon Valley’s housing market might seem, experts aren’t so sure home prices will budge all that much.

“This news in itself will not drive down prices much,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “While a 10,000-unit commitment is significant, Silicon Valley as a whole has about 3 million people living there.”

So if you consider the population of the entire area—many of whom would likely kill to move to Mountain View—10,000 new houses would house only 0.3% of these people. For you math-challenged, that’s less than a measly half-percent! 

And even though the number of homes may be edging upward, so are the number of people moving there.

“Silicon Valley remains a booming economy, so it’s likely that the population will continue to grow, further driving up prices,” Reiss continues.

As further evidence that more homes doesn’t necessarily lead to cheaper home prices, Florida Realtor® Cara Ameer points to another historically hot market: New York City.

“In New York, more new buildings has had no impact on housing prices or rents,” she says. If anything, the only change New Yorkers noticed is their neighborhood got a lot more cramped. The same will likely be true for picture-perfect Mountain View.

“The biggest thing people will see is increased congestion,” says Amer, “with many more residents, cars, and the need for schools and additional services.”

In fact, fears of overcrowding might even galvanize current homeowners in the area to show up en force at future City Council meetings to fight the greenlighting of additional developments—that is, unless they’re out-muscled by employee-hungry firms such as Google.

“As key businesses realize that the lack of housing is hurting their ability to recruit and retain good employees, it is possible that Mountain View’s decision is a harbinger for more pro-development decisions throughout Silicon Valley,” Reiss explains. “Current homeowners, called ‘homevoters,’ tend to make their anti-growth views known to local officials, but once the interests of local businesses focus on the lack of workforce housing, it can change the dynamics.

“These are powerful companies. The result is that those decisions can become more pro-growth than is typical for suburban communities.”