Real estate predictions for 2014

Demand will remain high and the cost of homebuying will increase for homebuyers in the Washington, DC metro area.

LIMITED HOUSING INVENTORY is the biggest driver of the DC region's housing market, says Federal Title & Escrow Company's founder, and as long as supply is limited the market in 2014 will look a lot like last year.

Houses with multiple offers selling for tens of thousands dollars above asking price in some cases – it happened frequently enough in 2013 that the editors at Urban Turf created a new column called Above Asking.

"You've got a migration of folks from all over the country trying to crack the DC [housing] market," said Todd Ewing, whose company handled more than 1,400 purchase closings in 2013. "That trend will continue."

Higher interest rates should not affect the region

Some real estate experts are predicting mortgage rates in 2014 will rise above 5% for the first time since 2010, but the increase is not expected to greatly impact the DC region's housing market.

Homeowners who were planning to refinance have already done so by now, Ewing said, and the federal government continues to attract new people to the region who are in need of housing, driving demand.

"There are still homebuyers out there looking, most two-income households," said Ewing, who's been handling real estate settlements and observing market cycles since the mid-90s. "I don't see a rising interest rate having much of an impact on whether a homebuyer moves forward."

Increased oversight from CFBP will increase closing costs

Expect the Consumer Financial Protection Bureau (created through the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010) to crack down on enforcement of the Real Estate Settlement Procedure Act, a piece of legislation from the 1970s meant to protect consumers from unethical business practices, including excessive fees.

"If the CFPB does what its charter sets forth, such as the enforcement of anti-kickback laws, and remains vigilant of those in the industry who engage in such practices at the expense of the consumer, then this crack down could ultimately be beneficial to the consumer," Ewing said.

But any benefit to the consumer will come at a price that will most likely get passed along to the consumer, as additional training, staffing and implementation new technology will add to the cost conducting a real estate closing.

Phasing out the HUD-1 Settlement Statement

The HUD-1 Settlement Statement will become extinct in August 2015, and the Closing Disclosure will take its place, according to a ruling of the CFPB last November. The new document is five pages and will essentially combine the Truth in Lending Disclosure with the HUD-1.

This year title companies will be looking to completely overhaul their software systems in preparation of change, which may lead to added costs for the consumer.

Federal Title anticipated the CFPB's ruling on the Closing Disclosure and incorporated it into Close It!, an iOS and Web app that accurately determines how much cash will cross the closing table during any given real estate settlement.

Tech developments from Federal Title

Speaking of technological developments at Federal Title, Ewing who has been pleased with the initial performance of the iOS app said he plans to announce the release of a new product later this year. Since launching in May 2013, Close It! has garnered nearly 10,000 downloads and the tablet version was nominated for a Tabby Award last fall, Ewing said.

"It's a popular tool with agents and lenders, and it's way ahead of its time in that it produces a Closing Disclosure," Ewing said. "Going forward we intend to keep on innovating, and we're excited to roll out something new for real estate professionals [later this year]."

Greatest media hits of 2013

It proved to be an exciting year for us with the release of our iOS and Web app, Close It!, which has garnered more than 8,000 downloads and was nominated last October for a Tabby Award.

Several publications wrote stories about our app, including the Washington Post, Washington Business Journal, DC Urban Turf and Curbed DC.

42 best tablet apps for business finalists announced by Tabby Awards
PR Web | Oct. 8, 2013

The Tabby Awards /Business, the only competition for the best business and enterprise tablet apps, announced its finalists today in its second competition. The Tabby Awards /Business received submissions this year from a dozen countries: Australia, Canada, Germany, India, Ireland, Israel, Japan, Poland, Switzerland, Turkey, the United Kingdom and the United States.

Real estate settlement app for Apple users
Heads Up RE | June 8, 2013

If you are in the market for a new home and are worried about how much it is going to cost you to complete the transaction, there is a new real estate settlement app for iPhone and iPad users called Close It!. This real estate settlement app allows you to figure out what your settlement costs are going to be when you sit down at the closing table and have to produce your down payment monies. Oh, and did I mention it is free, yes, it is free.

Title company unveils mobile app that produces customizable HUD-1
American Land Title Association | June 4, 2013

The company said getting started with the app is as easy as entering a purchase or sales price. The results can be fine tuned on a live worksheet to narrow down cash to close or cash in pocket within hundreds of dollars or less for consumers in D.C., Maryland, Virginia and Florida. 

Federal Title & Escrow creates app to generate cash to close info
The Title Report | May 31, 2013

Federal Title & Escrow released a mobile app called Close It! that produces a detailed picture of cash to close and monthly mortgage payments for homebuyers and cash in pocket for home sellers on an editable, shareable closing disclosure statement.

Tip of the week: New mobile app
Washington Post | May 31, 2013

Whether you’re the buyer or the seller, you want to know how much cash will cross the table at your real estate settlement. Federal Title & Escrow, a Washington title company, has developed a mobile app called Close It that works like Turbo Tax for real estate transactions.

Free app calculates closing costs
Baltimore Business Journal | May 29, 2013

Washington, D.C.-based Federal Title & Escrow Co. has launched a free application that helps homebuyers and sellers know exactly what their closing costs will be...

New app from D.C. company calculates closing costs
Washington Business Journal | May 29, 2013

The iPad app, called Close It!, produces customizable HUD-1 settlement statements for D.C., Virginia, Maryland and Florida residential real estate transactions, with a detailed picture of cash to close and monthly mortgage payments for buyers and cash in pocket for sellers...

Free app calculates closing costs
Washington Business Journal | May 28, 2013

The app includes 45 closing cost variables on the buyer's side and 22 variables on the seller's side, and produces an official HUD-1 Settlement Statement that can be saved, printed or emailed....

New app calculates total cash outlay for homebuyers
DC Urban Turf | May 20, 2013

Close It! from local title company Federal Title will work on mobile devices — though it’s currently available only on the iPad — and creates a document that replicates what you would see on a HUD-1 on the day that a buyers closes on a new home.

Testing Close It!, an app that calculates homebuying costs
Curbed DC | May 20, 2013

The ease of use on this app is pretty nice. The big important numbers (the cash to close and monthly payments) are significantly larger and anything in red, whether it's the interest rate or the type of property can be changed. Overall, this seems rather helpful in terms of doing the quick math for any purchaser that gets frustrated by that part of the process.

Realtors aim to help buyers navigate a D.C. market short on inventory
NW Current | Apr. 10, 2013

Even so, activity is solid. In the first three months, there was a 9.9 percent rise in contracts for condos and co-ops and a 0.8 percent increase in contracts for single-family homes, compared with the same period in 2012. Settlements are up in both categories — 25.6 percent for condos and co-ops, 6.3 percent for single-family homes.

“We’ve definitely seen things picking up,” said Joe Gentile, vice president of Federal Title & Escrow Co.

DC Tax Credit not renewed
Curbed DC | Jan. 10, 2013

The $5,000 DC Homebuyer tax credit was not renewed under fiscal cliff talks...

Most popular posts of 2013

At Federal Title we believe educating consumers and their agents is the best way to ensure the real estate closing process is as quick, painless and affordable as possible. Our attorneys regularly write articles based on their experiences "in the trenches" and provide insight and, occasionally, commentary on the current state of our industry.

Over the course of 2013, visitors to our website viewed Federal Title's official blog more than 65,000 times. The blog contains literally hundreds of articles, and the following is a list of the most popular articles written in the past year.

New simplified loan modification initiative announced to help troubled homeowners avoid foreclosure 
by Jackie Kurz

Fannie Mae and Freddie Mac will offer a new loan modification initiative designed to help troubled borrowers avoid foreclosure and remain in their homes, according to an announcement today from the Federal Housing Finance Agency. (3/27/2013)

What does it mean when my DC property is classified as Class 3? 
by Catherine Schmitt

As a real property owner in the District of Columbia, the last thing you would ever want or need is for the Department of Consumer and Regulatory Affairs to classify your property as Class 3 – Vacant Real Property. (4/9/2013)

My parents are going to be on title with me. Can I still qualify for the DC Homestead Deduction? 
by Todd Ewing

If you are buying a property in DC and otherwise qualify for the Homestead Deduction, you will still qualify even if your parents, who live somewhere else, are co-owners with you. As a benefit to homeowners living in a property as their principal residence, the DC Homestead Deduction subtracts $69,100 from the assessed value of the property before real estate taxes are calculated. (5/30/2013)

Loan payoff includes more than just principal balance 
by Joe Gentile

In about half of the settlements that I conduct a seller will stop me and comment, “The payoff is too high, I owe less than what’s listed.” This is because the seller is confusing the mortgage principal balance with the payoff amount. (3/20/2013)

I just bought a property in Maryland. How do I qualify for the Homestead Tax Credit? 
by Todd Ewing

If you just bought a property in Maryland, there is nothing that you need to do right now to qualify for the Maryland Homestead Tax Credit. The property taxes you pay are calculated based upon the assessed value of your property. If the assessed value goes up, your property taxes go up. (5/28/2013)

Refinance appraisal: What you can expect 
by Dianne Pickersgill

The following are some thoughts, based on my own personal experiences with refinance appraisals, including a refinance appraisal of my DC condo that took place this month. I’m not an appraiser, so this is not a professional opinion. (2/25/2013)

Popular $5,000 DC Homebuyer Tax Credit for first-time buyers not renewed for 2012 tax year 
by Nikki Smith

First-time homeowners in the District of Columbia, who purchased their principal residence after Dec. 31, 2011, will not be able to take advantage of the popular $5,000 DC Homebuyer Tax Credit when they file taxes this year. (1/8/2013)

Condominium limited common elements: Know what you're buying 
by Dianne Pickersgill

Condominium ownership is really popular in DC, Maryland, and Virginia. Here at Federal Title, condominium sales make up about 25% of our transactions. (2/11/2013)

6 real estate apps that make you look like a genius 
by Nikki Smith

Want to look smart in front of your clients? It’s gonna take more than having a smart phone with access to email and Internet. You need to know what real estate apps can increase your productivity, expand your networks and, well, make you look like a tech genius in front of your clients. (7/1/2013)

Benefits of a VA loan in today's real estate market 
by Jackie Kurz

With interest rates remaining steady at all-time lows and a housing market that has seen below-market prices in most areas, now is a great time for servicemembers to purchase a home or refinance their existing home and take advantage of the benefits of a VA loan. (4/10/2013)

Post settlement occupancy agreements: A useful tool, but beware of potential pitfalls

A post settlement occupancy agreement allows a seller to continue to live in his home after settlement, under an arrangement where the seller is essentially renting the home back from the new purchaser.

This type of arrangement can be a life-saver for a seller who is purchasing another home but won’t be able to close on that purchase until a few days or weeks after he sells his current home. Joe wrote a very informative blog post about post settlement occupancy agreements and how they can be a solution to settlement timing issues. 

I thought I would take a look at things from a different perspective and point out some potential pitfalls of such arrangements. In order to be protected, both purchasers and sellers need to prepare for the worst.

What do I mean by the worst? Imagine a case where a seller who is renting back catches the house on fire, and the house burns down to the ground. There are a lot of tricky issues in such a situation.

One thing we know for sure is that the purchaser now has no home to move into, which is obviously a problem, no matter how the liability issues get resolved.

In the normal case of a house fire, there is a homeowner’s insurance policy that would provide coverage. Here, presumably the purchaser obtained a homeowner’s policy with an effective date of the date of the settlement.

The GCAAR standard post settlement occupancy form states: "From the date of settlement the Buyer shall obtain and maintain insurance on the Property with the Buyer’s policy being primary in the event of other available insurance." (Form #1309, paragraph 6.)

The trouble is that despite this provision, the purchaser’s insurance company might have a different opinion.

For example, it is possible that the purchaser’s insurance would not cover the fire, under an exclusion based on the fact that the policy holder was not living in the property at the time of the fire?

Even if the purchaser thought ahead and got coverage for someone renting property, the typical post settlement occupancy agreement will say that the arrangement is not a landlord/tenant relationship, which might cause complications for insurance coverage.
For example, the GCAAR form states, "Nothing in this Agreement shall constitute a Landlord/Tenant relationship between Buyer and Seller." (Form #1309, paragraph 8.)

It also may be that the seller continued his/her homeowner’s policy through the rent-back period, but it is possible that this insurance would not cover the fire damage, due to the fact that the seller no longer owned the home at the time of the fire. The seller may have also gotten renter’s insurance for the rent-back period (the GCAAR form requires it), but typically that will cover only belongings, not damage to the house itself.

Even something less extreme than a whole house burning down can pose some tricky questions in a post settlement occupancy situation.

The buyer now owns the house, along with the appliances, HVAC, etc. If the seller negligently breaks the door off of the refrigerator during the rent-back period, one would think that the seller should be held responsible, and, normally, that would be the case, at least under the GCAAR standard form, which provides for a deposit by the seller to be applied to any damages to the property caused by the seller in excess of ordinary wear and tear. (Form #1309, paragraph 2.)

But what if the refrigerator simply stops working 2 weeks after the closing, during the rent-back period? Whose responsibility would that be?

Since the refrigerator is now the buyer’s, generally one might think the buyer would be responsible, but paragraph 3 of the GCAAR form provides that the seller is to deliver the property (i.e., deliver it at the end of the rent-back period) in the condition specified in the sales contract. The sales contract provides that the condition of the property at delivery is to be in substantially the same condition as of the date of the contract, the home inspection or some other date to be specified. If the refrigerator was working at the specified date, then the seller is responsible if it is not working at the end of the rent-back.

The bottom line is that both buyers and sellers should carefully review any post settlement occupancy agreement to see what the agreement provides concerning liability for issues that arise during the rent-back period and concerning the responsibility for obtaining insurance.

They then should make any revisions to that agreement that are necessary to protect their interests, in consultation with an attorney, if possible. They should also contact their insurance agent to discuss insurance coverage for the rent-back period.

One other thing that a buyer should do before agreeing to allow the seller to rent back after closing is to check with his lender to see whether the lender will permit it.
Typically lenders will allow a short rent back. For anything longer, the buyer could be in violation of the covenant in the loan documents that states that the property will be owner-occupied.

If the seller is paying a security deposit and/or "rent" at closing, these numbers will appear on the closing statement, which the lender needs to review and sign off on.

You don’t want the lender learning about the rent-back for the first time when they receive the draft closing statement from the title company and see those numbers.

New govt regulations take effect, drive up closing costs

Homebuyers in 2014 will no doubt experience a higher range of closing costs than those homebuyers coming before them. With the start of this new year, both mortgage lenders and title companies are now subject to several new regulations spawned by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. 

For example, as administered through the newly formed Consumer Protection Financial Bureau (CFPB), new disclosure forms will be required of mortgage lenders and title companies by August of 2015, including, but not limited to, the Loan Estimate (replacing the current Good Faith Estimate) and the Closing Disclosure (replacing the current HUD-1 Settlement Statement).

The requirement of these new disclosure forms effectively voids all current closing software production systems and demands a complete overhaul of those software systems. Re-tooling these software systems will be just one expense that will be passed along to the consumer. 

Another closing cost increase will be shifted to consumers with the forced adoption of Best Practices policies by title companies. Because the new law imposes liability on mortgage lenders for the acts of third-party vendors, including title companies, the mortgage industry has forced the hand of the title industry to adopt a uniform Best Practices policy. 

That means every title company, small or large – local or national – must implement and administer its own Best Practices policy and remain subject to yet another time-consuming annual audit. It also means that title companies (large or small) will likely have to expand their payroll to accommodate a chief compliance officer or an equivalent thereof. 

Whether or not the consumer is better protected remains to be seen but, for now, we do know that the costs of all these changes will be reflected on the new Closing Disclosure in the form of increased closing costs.

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Our blog contains general information only, not intended to be relied upon as, nor a substitute for, specific professional advice. Rate tables and figures that appear on our blog are deemed reliable but not guaranteed. For current rates & policies, refer to our Quick Quote and Consumer Guide. We accept no responsibility for loss occasioned to any purpose acting on or refraining from action as a result of any material on our blog.