Background, Credit Checks Are Fertile Ground for Lawsuits

Property managers and other real estate professionals routinely conduct background and credit checks in the course of business. Be vigilant: You could be sued for not adhering to federal and state regulations when gathering and sharing sensitive consumer data.

The latest “Window to the Law” video from the National Association of REALTORS® details your duty to comply with the Fair Credit Reporting Act when handling this data, including a consumer’s credit and rental history as well as other personal data. Aside from the federal law, state consumer data laws vary widely, says NAR staff attorney Mike Rohde. “Regardless of jurisdiction, consumer reports must only be used for a permissible purpose, which includes evaluations connected with credit, employment, insurance and rental housing,” he adds.

To prevent liability, Rohde suggests asking for written consent before ordering background or credit checks. If these reports could lead to a negative outcome, such as the denial of employment or rental housing, provide the person with notice and an opportunity to review a copy of the information, he says. Also, have a system in place to properly dispose of collected background and credit reports. A document retention policy should detail how you’ll handle it.

©National Association of REALTORS®
Reprinted with permission

Mortgage Rates Rise Again, Nearing Affordability Threshold

Mortgage rates continued inching up this week, nearing a threshold that would bring the average American household to a financial tipping point, warns Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®.

The 30-year fixed-rate mortgage jumped to an average of 5.66%, Freddie Mac reported Thursday. A 5.7% mortgage rate would force the typical household to spend over 25% of its annual income on a median-priced home, Evangelou notes on the Economists’ Outlook blog. Most financial experts consider homeowners to be “house burdened” at that level.

There’s a strong likelihood that mortgage rates move even higher, Evangelou writes, noting that the recent rise in the 10-year Treasury yield is influencing borrowing costs. Mortgage rates are nearly double what they were a year ago.

However, relief may be on the horizon for buyers. Fannie Mae predicted this week that the 30-year fixed-rate mortgage will drop to an average of 4.5% in 2023. Still, economists say home buyers who can afford to purchase now are better off moving forward rather than waiting for lower mortgage rates. Even if borrowing costs drop next year, high home prices likely will remain a challenge, Keith Gumbinger, vice president of the research firm HSH, recently told CNBC.

Freddie Mac reported the following national averages with mortgage rates for the week ending Sept. 1:

• 30-year fixed-rate mortgages: averaged 5.66%, with an average 0.8 point, increasing from last week’s 5.55% average. Last year at this time, 30-year rates averaged 2.87%.
• 15-year fixed-rate mortgages: averaged 4.98%, with an average 0.8 point, rising from last week’s 4.85% average. A year ago, 15-year rates averaged 2.18%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.51%, with an average 0.4 point, increasing from last week’s 4.36% average. A year ago, 5-year ARMs averaged 2.43%.

Freddie Mac reports commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.

©National Association of REALTORS®
Reprinted with permission

FSBOs Usually Soar in a Hot Market. Not This Time

The volatile housing market over the last couple of years has driven more consumers toward using real estate professionals rather than attempting to complete a transaction independently. FSBOs made up only 7% of home sales in 2021—the lowest share since 1981—according to the latest Profile of Home Buyers and Sellers from the National Association of REALTORS®. That’s a stark contrast from 15 years earlier when 12% of sellers went the FSBO route during the 2006 housing boom, the data shows.

While sellers also were in the driver’s seat last year as bidding wars exploded and list prices soared, most of them—90%—still found value in working with an agent in 2021 to get their home sold, according to NAR research. This may mean consumers are getting the message that a REALTOR® is an ally in any housing market. The top issues for which sellers are seeking your guidance, according to NAR data, are:

• Pricing a home competitively
• Marketing to potential buyers
• Negotiating a deal
• Finding a trustworthy, reputable professional

Talking Points to Convert Leads

NAR is helping you harness your influence by spotlighting the difference a REALTOR® makes to the success of a transaction at a new website, thedifference.realtor. The site emphasizes how REALTORS® abide by a strict Code of Ethics, observe standards of professionalism and are highly trained in the industry.

NAR is providing members with succinct language they can add to their websites and online profiles and bios, including static and animated social graphics, cover images, email signature banners and conversation-starters. This is intended to help provide a unified message around the value proposition of REALTORS®, NAR says. Association members are encouraged to leverage the resources about the value of the REALTOR® brand so consumers understand the REALTOR® difference.

“As members of the National Association of REALTORS®, we are unified by the REALTOR® brand and its iconic trademark ‘R,’” says NAR President Leslie Rouda Smith. “It’s important for consumers to understand that distinction. We need to engage with consumers in conversation that articulates our value.”

©National Association of REALTORS®
Reprinted with permission

REALTORS® Rush Aid to Kentucky, Missouri Flood Victims

The record-setting rains that deluged areas of Kentucky and Missouri in July caused extensive damage to homes and properties. The REALTORS® Relief Foundation has provided $1 million to help flood victims in both states stay in their homes or find emergency housing while recovering from their losses. RRF announced last month two separate $500,000 donations to the Missouri REALTORS® and Kentucky REALTORS® state associations to use toward disaster relief.

A slow-moving severe thunderstorm system crossed central Missouri on July 25, dumping a record amount of rainfall on St. Louis and St. Charles. The system continued moving into eastern Kentucky, causing a 1,000-year flood in the area that washed away homes.

“REALTORS® serve and care about the communities in which they live and work,” says RRF President Michael Ford. “When our members are mobilized to assist others who are facing difficult times, the collective impact is immeasurable. The REALTORS® Relief Foundation looks forward to assisting those who’ve experienced unimaginable loss and doing what we can to help these victims pick up the pieces of their lives.”

RRF has distributed more than $36 million in aid since 2001 toward disaster relief. It has funded over 100 disaster efforts and helped 19,000 families across 42 states and territories. The National Association of REALTORS® covers all administrative costs so all of the funds donated go directly to disaster relief causes.

©National Association of REALTORS®
Reprinted with permission

Mortgage Rates Hurt Buyers More Than Home Prices

Mortgage rates were back on the rise this week, hitting an average of 5.55%, Freddie Mac reported Thursday. Rates are nearly double what they were a year ago, and the latest housing data from the National Association of REALTORS® demonstrates the impact of the jump in borrowing costs.

The nation is witnessing a “housing recession,” says NAR Chief Economist Lawrence Yun, as existing-home sales plummeted 20% year over year in July, according to NAR data. Contract signings also dropped 20% in the same month. And there’s been a significant pullback in the new-home market—sales in the sector were down 30% annually in July—causing homebuilder sentiment to slide for the eighth straight month.

Further, “apart from rising mortgage rates, home prices continue to show double-digit year-over-year gains,” Nadia Evangelou, NAR’s senior economist and director of forecasting, writes on the association’s blog. A median-priced home is worth about $40,000 more than a year earlier. While home price increases add to home buyers’ costs, the impact of higher mortgage rates is much more—triple the impact on a monthly mortgage payment, Evangelou notes. An increase of just one percentage point in mortgage rates has the same effect on mortgage payments as if home prices rose by 13 percentage points, she writes.

Homes haven’t been this unaffordable since 1989, NAR reports. Rising mortgage rates have made home loans more expensive, adding to the cost of homeownership. The typical monthly mortgage payment was nearly $2,000 in June, up 54%—or $679—compared to a year ago. “The combination of higher mortgage rates and the slowdown in economic growth is weighing on the housing market,” says Sam Khater, Freddie Mac’s chief economist. “Home sales continue to decline, prices are moderating, and consumer confidence is low. But amid waning demand, there are still potential home buyers on the sidelines waiting to jump back into the market.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Aug. 25:

• 30-year fixed-rate mortgages: averaged 5.55%, with an average 0.8 point, up from last week’s 5.13% average. Last year at this time, 30-year rates averaged 2.87%.
• 15-year fixed-rate mortgages: averaged 4.85%, with an average 0.8 point, up from last week’s 4.55% average. A year ago, 15-year rates averaged 2.17%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.36%, with an average 0.4 point, dropping from last week’s 4.39% average. A year ago, 5-year ARMs averaged 2.42%.

Freddie Mac reports commitment rates along with average points to better reflect the total upfront cost of obtaining a mortgage.

©National Association of REALTORS®
Reprinted with permission

Survey: 94% of Sellers Don’t Disclose Property Defects

Home buyers who waive the inspection contingency must rely heavily on seller disclosures to be informed about any potential problems with the property. But more than 90% of buyers say they found at least one issue with their home after the transaction that the seller didn’t disclose, according to a new survey from Cinch Home Services, a home warranty company. Even more alarming is that 94% of sellers admit to selling their homes without disclosing a known issue.

Many buyers who skip the inspection contingency to sweeten their offer may later regret their decision. Make sure your clients understand the risks. Read more.

“Sellers failing to disclose home damage is against the law in most states. To ensure protection, prospective home buyers should ask for a completed seller’s disclosure in addition to conducting a thorough home inspection before closing on a new home,” says Cinch spokesperson Bella Valentini.

The top three problems buyers discovered after closing involved the electrical system, fixtures and plumbing. The survey shows the majority came from unpermitted repairs and upgrades, suggesting sellers should rethink doing some DIY jobs.