6 Tips for Keeping Real Estate Marketing Legal

Facebook has allegedly enabled housing discrimination by allowing real estate advertisers to exclude audiences protected under the Fair Housing Act.

As a result, real estate professionals are advised to take several steps to ensure their marketing on the social media platform is legal and ethical.

  • Never use targeted marketing that excludes a specific protected class on a listing.
  • Don't use Facebook as your only advertising tool – its algorithm doesn't guarantee that a broad section of the population will see your ad, even if your targeting isn't exclusive.
  • Know your state and local fair housing laws and ensure your marketing is in compliance will all of these laws. In many cases, local laws protect more groups than the ones specified under the federal Fair Housing Act.
  • Consider working with a digital marketing firm or hire an individual to do that work exclusively for your company.
  • In addition, use other types of marketing methods to reach parts of the market not reached by the MLS.
  • Avoid engaging, commenting, liking or clicking on a post from someone else that could be a fair housing violation.

Finally, brokers should require agents to market consistently, including rules that extend to social media marketing as well.

‘Nonprime’ Loans Expand Mortgage Options

Subprime mortgages – which were blamed for sparking the last housing crisis – are reappearing, but this time they're dubbed "nonprime" loans. This lending option, which carries new quality standards, is growing for buyers with damaged credit.

California-based Carrington Mortgage Services is one company expanding its nonprime loan offerings.

"We believe there is actually a market today for people who want to buy nonprime loans that have been properly underwritten," Rick Sharga, executive vice president of Carrington Mortgage Holdings, told CNBC. However, he says, "We're not going back to the bad old days of ninja lending when people with no jobs, no income and no assets were getting loans."

Carrington Mortgage Services, which plans to manually underwrite each loan, will qualify borrowers with FICO credit scores as low as 500. Borrowers could qualify for loans of up to $1.5 million on single-family homes, townhomes or condos. The lender also will qualify borrowers who've had recent problems reported on their credit histories, such as a foreclosure, bankruptcy or a history of late payments. But borrowers who are at higher risks will be required to make a bigger down payment, and the interest rate on the loan will be higher.

"What we're talking about is underwriting that goes back to common sense sort of practices," Sharga says. "If you have risk, you offset risk somewhere else. We probably are going to have the widest range of products for people with challenging credit in the marketplace."

Other lenders also are getting into the nonprime space, including Angel Oak and Caliber Home Loans – and more than 80 percent of Angel Oak loans are nonprime.

"We believe that more competition is positive for the marketplace because there is strong enough demand for the product to support multiple originators," says Lauren Hedvat, managing director of capital markets at Angel Oak. "Additionally, the more competitors there are, the wider the footprint becomes, which should open the door for more potential borrowers."

Source: "Subprime Mortgagees Make a Comeback – With a New Name and Soaring Demand," CNBC (April 12, 2018)

Rising Rents Pushing Millennials to Buy

This year, the typical spring buyer is on the hunt for a three bedroom, two-bathroom home with a garage and up-to-date kitchen, according to a new survey released from realtor.com. The survey also found that family needs and rising rents are motivating millennials to get into the market, while 55+ buyers are looking for privacy and comfort in their new home.

"Although record-low inventory and high prices make this housing market unique, some classic features still top most shoppers' wish lists," says Danielle Hale, chief economist for realtor.com. "At the same time, we found some clear differences in priorities. For instance, older buyers are concerned with privacy and being able to age comfortably, while millennials place more emphasis on family needs, stability and personal expression."

Based on an online survey of more than 1,000 active buyers conducted in early March by Toluna Research, the survey provides insight into both the most sought-after homes as well as the motivations underpinning what shoppers are looking for.

Majority of buyers want space, multiple bathrooms and a garage
The survey found that 44 percent of all respondents said they are looking for a three-bedroom home, and 93 percent of respondents want at least two bathrooms. Additionally, 27 percent of all buyers rate a garage as one of the most important home features, ahead of an updated kitchen (24 percent) and open floor plan (20 percent).

Older buyers want privacy & comfort; millennials favor family & self-expression
More than 20 percent of buyers 55 years and older said that privacy – having a space solely of their own – was their main goal for purchasing a home. That was followed by their motivation for physical comforts (18 percent) and stability (5 percent).

Fulfilling family needs took the top spot for millennial buyers (17 percent), followed by stability (14 percent) and personal expression (13 percent); only 12 percent of buyers younger than 55 cited privacy as their chief priority. However, 9 percent of 35- to 54-year-old buyers and 6 percent of 55+ cited personal expression as a main goal for purchasing a home.

For millennials, the rent is too high
Twenty-three percent of buyers between 18 and 34 years old reported rising rent as a trigger for their desire to purchase a home – more than any other option. This corresponds with steep increases in rents across the country in recent years, especially in many high-cost urban areas that have become magnets for millennials. HUD data shows that rents were up in 85 of the top 100 metro areas, including 9 metros where rents rose by double-digit percentages from a year ago.

Millennials like contemporary and colonial homes; older buyers prefer ranches
Among millennials who expressed a home-style preference – 11 percent didn't – contemporary and colonial homes took the top spots, each favored by 10 percent of respondents. On the other hand, ranches are the most popular home style for buyers 55 and older, favored by 28 percent, followed distantly by contemporary homes at 12 percent. Only 6 percent of millennials favor ranch homes.

Why Homeowners Want a Smaller House

Some homebuyers are drawn to the smallest home on the block. A survey by Houzz, a home remodeling and design website, sought to find out why these homeowners prefer residences that are often 1,000 square feet or less.

Homeowners of small homes say relaxing and keeping the space clean is "easy" in a small home, according to the survey, which was based on 216 respondents who say they live in a small home.

Homeowners also say there are many layout and decor options to utilize to make your home not feel so small. The most popular characteristics of small home interiors are lots of natural light and easy access to the outdoors, according to respondents.

The outdoor space is important – 30 percent of respondents said they renovate outdoor space to extend the size of their living area.

Also, 26 percent say they created an open floor plan in their small home to maximize the space within it.

However, the most difficult aspects of owning a small home, according to respondents, are having enough storage, hosting visitors, and having enough space for crafts and cooking projects.

The Fed Imposes New Penalties on Wells Fargo

The Federal Reserve announced Friday it is imposing more penalties on Wells Fargo, freezing the bank's growth until it can prove it has improved its internal controls. In addition, the bank agreed to replace four board members.

It's the latest blow against the San Francisco bank that has had its reputation tarnished by revelations it opened phony customer accounts and sold auto insurance to customers who did not need it.

The new penalties were announced on Fed Chair Janet Yellen's last day at the central bank.

"We cannot tolerate pervasive and persistent misconduct at any bank," Yellen said in a statement. "The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers."

The Fed said it is restricting the bank's assets to the level where they stood at the end of last year until it can demonstrate that it has improved its internal controls.

The announcement came after the close of trading on Wall Street Friday. The bank's stock fell more than 6 percent in after-hours trading.

Wells Fargo has 16 members on its board of directors. It agreed to replace three directors by April and another one by year-end. The letter did not say if particular board members were being singled out. Fed officials referred questions about who will be replaced to the bank.

In a statement, Wells Fargo said it is "confident" it will satisfy the Fed's requirements.

"We take this order seriously and are focused on addressing all of the Federal Reserve's concerns," the bank's CEO, Timothy Sloan, said. "It is important to note that the consent order is not related to any new matters, but to prior issues where we have already made significant progress."

Sloan said that "while there is still more work to do, we have made significant improvements over the past year to our governance and risk management that address concerns highlighted in this consent order."

The Fed's new order marked the latest chapter in a series of scandals which have rocked the bank in recent years.

Wells Fargo has admitted that employees opened more than 3 million fake accounts in order to meet sales quotas. It ended up paying $185 million to regulators and settled a class-action suit for $142 million.

It also has admitted it signed up hundreds of thousands of auto loan customers for auto insurance they did not need. Some of those customers had their cars repossessed because they could not afford both the auto loan and insurance payments.

And Wells Fargo also offered refunds to customers last year after acknowledging that its mortgage bankers unfairly charged them fees to lock in interest rates on mortgages.

The Fed's action came on a 3-0 vote. Randal Quarles, who is the Fed's vice chairman for supervision, has recused himself from participating in matters involving Wells Fargo.

Mortgage Rates Continue to Rise for the Fourth Straight Week

Long-term U.S. mortgage rates rose for the fourth straight week as lending standards continue to tighten. The rates on 15-year, fixed-rate mortgages and five-year adjustable-rate mortgages hit the highest level since 2011.

Mortgage giant Freddie Mac says the rate on 30-year, fixed-rate mortgages averaged 4.22 percent this week, the highest since March and up from 4.15 percent from a week earlier. They stood at 4.19 a year ago.

The rate on 15-year, fixed-rate loans, popular among homeowners who refinance, rose to 3.68 percent this week, the highest since July 2011 and up from 3.62 percent last week and 3.41 percent a year ago.

The five-year, adjustable rate rose to 3.53 percent from 3.52 percent last week and it's the highest since April 2011.

Rates are rising as the Federal Reserve attempts to control inflation amid signs of economic strength. The Fed is widely expected to raise short-term rates when it gathers again in March, though it held off at its meeting this week. The Fed raised rates three times in 2017.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week.

The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. The fees were all unchanged this week at 0.5 point for 30-year and 15-year mortgages and 0.4 point for five-year adjustable mortgages.

How to Verify an Escrow Deposit was Made

A lot of Legal Hotline questions focus on escrow deposits, and a significant number of those questions come from listing agents who are upset that they haven't received proof that the funds actually made it into an escrow account – or even just a simple notification that the buyers did indeed deposit money by the dates stated in the contract.

Most common escrow deposit issues

Proof of deposit
No law requires an agent to send a copy of an escrow check (or wire transfer) to prove that an escrow deposit was made. Furthermore, a copy of a check doesn't do much good. It proves only that a check was written – not that it was given to the escrow agent in accordance with the contract.

Verification of deposit
The requirement for verification of the escrow depends on who chooses the escrow agent, the buyer or the seller. If the buyer chooses the escrow agent and it is a title company or an attorney, Section 61J2 of the Florida Administrative Code says the following rules apply:

  • If the buyer chooses a title company or attorney as the escrow agent, the licensee who prepares the contract must indicate the name, address and telephone number of the selected title company or attorney on the contract.
  • Within 10 business days after each deposit is due, the broker representing the buyer must make a written request to the title company or attorney, asking the escrow agent to verify receipt of the buyer's deposit.
  • Then, within 10 business days of the date that request was sent, the broker for the buyer must provide the seller's broker with a copy of the confirmation of receipt from the escrow agent.
  • If there is no response from the title company or attorney, the buyer's broker must inform the listing broker that they did not receive verification from the escrow agent.

Note that this rule only applies if:

1.The buyer chooses the escrow agent

2.The escrow agent is an attorney or title company

If the seller picks a title company or attorney as the escrow agent, the above rules do not apply and there is no verification requirement.

The listing broker can confirm receipt by contacting the escrow agent directly after each deposit is due according to the dates in the contract. If the buyer chooses a title company or attorney as escrow agent, the buyer's broker must comply with Florida Administrative Code and provide a response to the listing broker.

If a broker – not a title company or attorney – is holding the escrow, then the two brokers involved in the transaction can confirm receipt upon request, but there is no procedure for verification required by law.

Understanding the role of the agents with respect to escrow verification is key to avoiding potential unnecessary conflict.

Negotiating Repairs with an AS IS Contract

One of the most popular contracts Florida Realtors has available for members is the Florida Realtors/Florida Bar "AS IS" Residential Contract for Sale and Purchase ("FR/Bar AS IS"). As the name implies, the seller listed the property "as is," which means the seller has no obligation to make repairs.

However, many Florida Realtors Legal Hotline calls involve a buyer requesting repairs from a seller after the inspection results come in during the inspection period. While nothing prevents parties from renegotiating the terms of an existing contract, it's important to understand the nuances and risks in doing so in order to facilitate a smooth transaction.

It's imperative to recognize this: There is no obligation on the seller's part to make any repairs, nor to even respond to a request for repairs.

As a buyer's agent, it's important to communicate this upfront with buyers because you want to have a plan in place if the seller says "no" or simply doesn't respond. The buyer has a strong right of cancellation during the inspection period, but once that period expires, that's it. There may be other contingencies within the contract, but the time to cancel for any reason within the buyer's sole discretion is gone.

In some cases, a buyer hasn't heard back from the seller, the end of his inspection period is fast approaching, and he isn't sure what to do. In this case, your buyer must make a decision: Either stay in the deal and potentially take the property "as is" without the requested repairs or cancel before the inspection period ends.

What if a seller agrees to make repairs?

Assuming the seller does agree to a buyer's repair request, their agreement should be written into the contract under the additional terms or as an addendum to the contract.

While it seems easy enough to jot something down, however, Realtors should understand the importance of the language used in this repair agreement – and they should also understand the potential liability they're taking on if they take it upon themselves to draft this addendum.

Is the seller agreeing to fix an electrical problem? Great. But simply stating that the seller will do so is not adequately covering the parties. Far too often, calls to the Legal Hotline involve questions about the way in which the seller completed those agreed-upon repairs. But most of the time, the language used in the repair addendum didn't address any repair standards or said what would happen if the seller didn't make the repair at all or did it inadequately by the buyer's standards.

The Florida Realtors contracts that obligate sellers to make repairs contain additional language regarding repair standards as well as when the repairs should be made. This language isn't in the FR/Bar AS IS contract.

An addendum that involves many repairs, of varying degrees, likely should be drafted by an attorney to ensure appropriate language is used to protect the buyer and seller.

As stated in articles before, the language in the Florida Realtors contracts varies, and what may be in one isn't necessarily contained in the other. Recognizing your limitations in assisting your buyer or seller is a good way to avoid running into problems later.

What to Expect for "2018"

The housing picture is likely to improve in 2018. Why? Home prices are expected to climb, but not as fast.

Plus, more houses could be for sale toward the end of the year, giving homebuyers a greater selection to choose from, while homeowners will have more equity to borrow from.

Yet in other ways, 2018 might continue to be challenging, especially for homebuyers. Mortgage rates are likely to rise, reducing affordability.

Here are 10 housing and mortgage trends to expect in 2018.

1. Home prices decelerate

Good news for first-time homebuyers: Home-price appreciation is expected to cool down in 2018 after a torrid couple of years.

Home prices rose 6.3% in 2016, according to the Federal Housing Finance Agency. They're on track to exceed 6% in 2017, too. But for next year, the median forecast among six industry and lender groups is for a 4.1% increase in existing home prices nationwide.

Why the slowdown? One factor is home construction. Economists expect the construction of single-family houses to rise sharply in 2018, based on building permit applications. The median estimate has single-family housing starts rising about 8% in 2018, to roughly 912,500 new houses.

2. More homes for sale

Homebuyers are struggling to find houses for sale. The shortages are especially acute for the kinds of homes that first-time buyers tend to get. Among the reasons for the tight supply:

·Many baby boomers are content to age in their homes instead of downsizing

·Investors bought millions of homes after the housing bubble burst, and they're making too much money as landlords to sell

·Home builders make more profit from expensive houses than entry-level houses, so that's what they're constructing

But there's some hope for 2018: Realtor.com predicts that the housing supply pinch will begin to ease late in the year.

"It looks like we could get to a point where we're seeing growth in inventory sometime in the fall of 2018," says Danielle Hale, chief economist for Realtor.com.

3. Home sales could rise

Resales of existing homes are expected to rise modestly in 2018. The median estimate is that existing home sales will rise 2.5%, to 5.6 million units.

Meanwhile, sales of new homes are expected to rise a median of 7%, to 653,500 newly built single-family houses.

According to Realtor.com, cities in the South will show the most sales growth in 2018. Hale says she expects 6% existing home sales growth, particularly in markets such as Dallas; Tulsa, Oklahoma; Little Rock, Arkansas; and Charlotte, North Carolina. Hale says those places are not as "regulation constrained," they have strong regional economies and developers have plenty of vacant land to build on.

4. Mortgage rates head up

Mortgage rates are expected to rise in 2018. CoreLogic, a data provider for the real estate industry, averaged six forecasts of mortgage rates, arriving at a consensus view that the 30-year fixed will average 4.7% in December 2018. In November 2017, the 30-year, fixed-rate mortgage averaged 4.07%.

"Not only are mortgage rates higher, but mortgage rates will be at the highest level since 2011," Nothaft said at the Urban Institute symposium. "So we're looking at an environment, going forward, where this era of cheap mortgage rates will largely be behind us."

Interest rates are notoriously resistant to prediction, though. At the beginning of 2017, most people expected mortgage rates to rise steadily throughout the year. And they did rise - for a few weeks. The average 30-year fixed peaked in mid-March 2017 at 4.58%, according to NerdWallet's daily survey. Then it declined, dipping slightly below 4% a few times in the summer, before moving upward slightly in the fall.

5. Affordability declines

If, as expected, home prices and mortgage rates go up in 2018, homes will be less affordable.

For example, if mortgage rates rise to 4.7% toward the end of 2018, and the median price of existing homes rises by 4.1%, then monthly mortgage payments for a typical house would rise substantially.

But according to an Urban Institute analysis, middle-class families in much of the country still have some financial wiggle room if rates and prices rise in 2018. Most home buyers don't appear to stretch to the limits of affordability, the Urban Institute wrote.

6. More equity, more HELOCs

As home values rise, homeowners gain equity. And banks expect millions of homeowners to borrow against that equity.

About 1.6 million homeowners are predicted to get new home equity lines of credit in 2018, a 16% increase over 2017, according to a recent TransUnion study. The credit bureau says 67% of homeowners have enough equity to get HELOCs, and 80% of those borrowers have high credit scores.

TransUnion forecasts that 10 million homeowners will get HELOCs from 2018 through 2022, double the number of new lines of credit in the five years before that.

7. Security headaches continue

Thieves are stealing down payments from homebuyers by combining email hacking with wire fraud. And there's no sign of it slowing.

Complaints of this type of wire fraud skyrocketed by 480% in 2016, according to the 2016 annual report (the latest available) from the FBI's Internet Crime Complaint Center. Lenders and title companies say the problem worsened in 2017, and that they fend off this form of fraud constantly.

The best way to avoid becoming a victim: When you receive emailed instructions for wiring money, call your agent to verify. The email may be a fake, designed to trick you into wiring money into a thief's account.

8. More options for people with credit issues

A few specialty lenders are focusing on nontraditional mortgages. For example, Angel Oak Mortgage Solutions in Atlanta targets the borrower 'who has had a life event, so they lost their house or had to file bankruptcy or things got really bad, but they've now got their feet back on the ground and they're ready to buy their next house,' says Tom Hutchens, the lender's senior vice president of sales and marketing.

Several lenders offer interest-only mortgages, and even loans with limited income documentation. These mortgages are dubbed 'non-QM' because they don't meet Fannie Mae's and Freddie Mac's plain-vanilla 'qualified mortgage' rules. One prominent non-QM lender, Impac Mortgage Holdings, plans to begin securitizing these loans early in 2018.

9. Lenders embracing automation

Mortgage lenders continue to pour money into automating the loan-application process. The best-known example is Rocket Mortgage by Quicken Loans. But Quicken isn't the only lender that embraces automation. Some lenders, such as loanDepot, cook up their own automation in-house, while software providers such as Blend and Roostify help large and small banks to automate applications. Now a few lenders want to use automation to guide borrowers to loan products that best suit them.

10. Tax reform could affect buyers and owners

Lawmakers were still working on tax reform as this article was being written. Preliminary House and Senate versions limited the number of home sellers who would benefit from the home capital gains exclusion, and they treated the mortgage interest tax deduction differently. It's too early to know how a final tax reform bill would affect home buyers and homeowners, but we will keep you posted.

9 Grants & Programs That Help Secure a First Home

Money issues often stand in the way of homeownership. A survey by rental service Apartment List found that 80 percent of millennial renters want to buy a home, but most say they can't afford to.

What you may not realize is that many first-time homebuyer programs and grants offer financial help, and you may be eligible for various types of assistance.

Here are nine first-time homebuyer programs and grants designed to help you land a great mortgage and get a place of your own.

FHA loan
In an FHA loan, the Federal Housing Administration insures the mortgage. The FHA's backing offers lenders a layer of protection, meaning that your lender won't experience a loss if you default on the mortgage.

FHA loans typically come with competitive interest rates, smaller downpayments and lower closing costs than conventional loans.

If you have a credit score of 580 or higher, you could be eligible for a mortgage with a downpayment as low as 3.5 percent of the purchase price. If your credit score is lower than 580, you still might qualify for an FHA mortgage, but the downpayment would be at least 10 percent of the purchase amount.

USDA loan
The U.S. Department of Agriculture has a lesser known homebuyer assistance program. While the program focuses on homes in certain rural areas, you don't need to buy or run a farm to be eligible.

The USDA guarantees the home loan. There may be no downpayment required, and the loan payments are fixed.

Applicants with a credit score of 640 or higher typically get streamlined processing. With a credit score below 640, you still can qualify for a USDA loan, but the lender will ask for extra documentation about your payment history.

Keep in mind that there are income limitations, which can vary by region.

VA loan
The U.S. Department of Veterans Affairs helps active-duty military members, veterans and surviving spouses buy homes.

The VA guarantees part of the loan, making it possible for lenders to offer some special features. VA loans come with competitive interest rates and require no downpayment. You aren't required to pay for private mortgage insurance, and a minimum credit score isn't needed for eligibility.

If it becomes difficult to make payments on the mortgage, the VA can negotiate with the lender on your behalf.

Good Neighbor Next Door
The Good Neighbor Next Door program, sponsored by HUD (Department of Housing and Urban Development), provides housing aid for law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers.

Through this program, you can receive a discount of 50 percent on a home's listed price in regions known as "revitalization areas." Using the program's website, you can search for properties available in your state. You must commit to living in the home for at least 36 months.

Fannie Mae or Freddie Mac
Fannie Mae and Freddie Mac are government-sponsored entities. They work with local lenders to offer mortgage options that benefit low- and moderate-income families. With the backing of Fannie Mae and Freddie Mac, lenders can offer competitive interest rates and accept downpayments as low as 3 percent of the purchase price.

Fannie Mae also provides homeownership education for first-time homebuyers through its "HomePath Ready Buyer" program.

Energy-efficient mortgage
An energy-efficient, or "green" mortgage is designed to help you add improvements to your home to make it more environmentally friendly. The federal government supports EEM loans by insuring them through the FHA or VA programs. The key advantage of this mortgage is that it lets you create an energy-efficient home without having to make a larger downpayment. The extra cost is rolled into your primary loan.

Some improvements you can make include installing double-paned windows, new insulation or a modern heating-and-cooling system.

FHA Section 203(k)
If you've run the numbers to see how much house you can afford and have determined a fixer-upper is best for your budget, the Section 203(k) rehabilitation program may be a good fit. This type of loan, backed by the FHA, takes into consideration the value of the residence after improvements have been made. It then lets you borrow the funds you'll need to carry out the project and includes them in your main mortgage.

The downpayment for a 203(k) loan can be as low as 3 percent.

Native American Direct Loan
Since 1992, the Native American Veteran Direct Loan program has helped Native American veterans and their spouses buy homes on federal trust lands. The VA serves as the lender. If you're eligible, you won't be required to make a downpayment or pay for private mortgage insurance.

This first-time homebuyer loan also offers low closing costs and a 30-year fixed-rate mortgage.

Local grants and programs
In addition to the various programs provided by the federal government, many states and cities offer help to first-time homebuyers. Before buying a home, check your state's or community's website for information on housing grants and programs available in your area.

You also might consider contacting a real estate agent or local HUD-approved housing counseling agency to learn more about programs in your area that might apply to your situation.