Buyer’s remorse is likely to take on a more sinister turn in the coming months, as people who purchased their houses at the top of the market take out their frustrations on their real estate agents.
Historical precedent suggests that as housing values stagnate and then fall, the “last batch” of buyers often become resentful – so much so that they may lash out at their agents or other professionals involved in the process, according to Victor Insurance Managers. The firm, a major vendor of errors-and-omissions policies to agents and brokers, said that realty companies should expect to see a jump in the number of lawsuits filed against their agents in the coming months. When tempers rise, matters ordinarily considered minor inconveniences could become major issues to be litigated.
As the firm points out, agents who are sued in these market conditions face no greater liability of being found at fault than they would any other time. But that doesn’t lessen the ordeal of defending themselves in a court of law.
Price Cuts for New Homes
In today’s new-home market, mortgage rate buy-downs, upgrades and cash to cover closing costs are already the norm. Some builders are even offering cash bonuses or higher commissions to agents who bring buyers to their doors.
Now, price cuts are imminent – or already taking place, said Ben Caballero of HomesUSA. The Dallas-based brokerage lists new homes for sale for more than 60 builders in the four major Texas markets.
“Builders offer the incentives and bonuses before lowering prices,” Caballero told me. “They are now lowering prices.”
Caballero knows a bit about selling new houses: He is a three-time Guinness World Record holder for “most annual home sale transactions through MLS by an individual sell-side real estate agent.” He is also the only agent to exceed $1 billion in annual sales, a feat he first achieved in 2015, then repeated each year through 2018 – when he notched more than $2 billion.
New American Home’s Supply Chain Woes
The New American Home, that annual homage to the latest building products and construction techniques, is struggling towards the finish line.
The showpiece is rolled out annually at the huge National Association of Home Builders convention, the International Builders’ Show. The 2023 model is set to make its debut at the show in January. But the home’s builder is dealing with the same supply chain issues that every other builder is confronting.
In fact, the project stood practically still for more than three months during the spring while waiting for products to arrive.
“Our biggest challenge has been figuring out when each of the products will show up so we know when to schedule our labor,” said lead architect Michael Gardner. “All of our [subcontractors] have been so busy, and because delays have become so common, no one will commit to a specific date until the product is on site.”
As the flagship exhibit of the IBS, the house has a hard deadline for completion. So, to stay on top of the tight installation schedules, Gardner said his team is following up with vendors weekly, if not daily.
“It’s now gotten to the point where it seems like we’re more of a logistics company than a construction company,” the architect said.
Despite the significant delays, the project is on track for completion this month.
The 7,575-square-foot demonstration house features five bedrooms, seven baths, a spa, a game room, a private office, a state-of-the-art outdoor kitchen, a rooftop deck and a two-tier pool.
FHA Now Finances Flood Coverage
In a change two years in the making, the Federal Housing Administration is now allowing borrowers using FHA-insured financing to secure flood insurance policies from private insurers.
The FHA requires that properties in Federal Emergency Management Agency-designated Special Flood Hazard Areas have flood insurance. But flood coverage is often advisable beyond those areas.
The shift now gives FHA-borrowers an option: They can obtain flood coverage in the private market or through the National Flood Insurance Program. Private policies are usually, but not always, less expensive than those offered through the federal program, and often provide better coverage.
“The new rule is a victory for consumers, for choice, and for flood coverage that will protect more borrowers and property from the No. 1 natural disaster,” said Kenny Parcell, president of the National Association of Realtors.
Accepting private policies shifts the risk from Uncle Sam to the private sector. But here’s the rub: Private companies must align their policies with NFIP requirements, or else their policies will be rejected, even if they are acceptable for other federally backed loans.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at email@example.com.