2019 Spring Newsletter

spring-bannerWhat's New:

Happy Spring! It was a long, cold, snowy winter, but the snow is finally melting, the temperature is rising and we are looking forward to buyers getting spring fever.

Biggest Challenges for Real Estate Firms Over Next 2 Years

Although with our business there are challenges every day, the following are the top challenges that real estate firms are currently facing:

  • Keeping up with technology.
  • Increased competition from nontraditional market participants.
  • Growing concerns over housing affordability

44% of firms said they expect competition from virtual firms to increase over the next year, with 43% agreeing that such competition would be from nontraditional market participants. We all know that millennials are our new target audience for home ownership. 58% of firms are concerned with millennials’ ability to purchase a home, with 46% being concerned about millennials’ view of homeownership. The majority of real estate firms remain confident that sales and profits will increase over the next year.

Is it Time to Sell?

Yes it is! According to a report from Realtor.com, the perfect time for sellers to have their home sold is between March 31 and April 6. According to the report, the first week of April sees the most home viewings, 14% more on average and homes are likely to sell nearly 9% faster on average and typically sell for 6% higher than they would at the beginning of the year.

“April is best for sellers looking to maximize list price, and also reduce the risk of price cuts and competition from other sellers," said Danielle Hale, Chief Economist for realtor.com. "Given the time it takes from listing to close, putting a home on the market in early April positions sellers to attract buyers seeking to close and move before the beginning of school year."

What makes the first week of April special is that buyers are less likely to back out for other homes, forcing a price reduction on a seller's home. Homes sold in June are 1% more likely to take a price cut, while homes sold in April are 1% less likely to cut their price back. In addition, April sales may also be boosted by the lower mortgage rates, which are now 4.5% or lower.

More About Millennials

Data from Realtor.com now proves what we already know: Millennials are buying houses. Lots of them.

According to Realtor.com, in January 2017, Millennials surpassed Generation X as the group that was responsible for the most new mortgages. By the end of 2018, Millennials represented 45% of all new mortgages, compared to 36% for Generation X, and 17% for Baby Boomers. They also exceeded older generations in the total dollar amount of those mortgages, which shows that Millennials are willing to take on larger mortgages to fulfill their dreams of homeownership. They are also making smaller down payments.

Millennials are also starting to expand their footprint in the market. Affordability is a very important factor for Millennial homebuyers, so many are moving to housing markets with strong job markets that previous generations considered less desirable.

 

Market News:

Mortgage rates fell quickly after the Fed's announcement that it would be getting back into the bond-buying business, which could take rates even lower. The average rate on the popular 30-year fixed, fell from 4.40% to 4.34%, according to Mortgage News Daily. That is the lowest in over a year. As you know, the rate had surged to over 5% at the start of November, which caused home sales to fall sharply in December and January.

Even small rate moves can have a big impact on home buying. The drop in rates helps both potential buyers and current homeowners who might be able to benefit from a refinance.

Multiple data show improving conditions. Consumer sentiment about home buying is turning more positive, according to a recent NAR survey. And, the data on the number of people applying for a mortgage to buy a home has also been increasing.

What caused the slump and why is that changing? Among the reasons: Home prices were becoming unaffordable; the tight supply of inventory from multiple years of inadequate new home construction pushed the median home price to reach an all-time high in 2018; mortgage rates were not helping as they steadily trended up to above 5% for the first time in a decade.

Tax News

It is that time again and with the new tax changes for 2018, taxpayers have plenty of questions relative to what real estate costs are deductible. The following is for informational purposes only and you must consult your tax advisor/CPA on whether such costs will be deductible for you. So, what is deductible? It depends.

You may want to itemize if you have deductions totaling more than the standard deduction, which is $12,000 for single people and $24,000 for married couples filing jointly. Every taxpayer gets this deduction, homeowner or not. And most people take it because their actual itemized deductions are less than the standard amount.

To decide if you should take it, you need to know what’s tax deductible when buying or owning a house. Here’s the list of possible deductions:

Closing Costs

The one-time home purchase costs that are tax deductible as closing costs are real estate taxes charged to you when you closed, mortgage interest paid when you settled, and some loan origination fees (a.k.a. points) applicable to a mortgage of $750,000 or less.

Costs of closing on a home that isn’t tax-deductible include:

Mortgage interest and property taxes are annual expenses of owning a home that may or may not be deductible.

Mortgage Interest

Yearly, you can write off the interest you pay on up to $750,000 of mortgage debt. The $750,000 cap affects loans taken out after Dec. 17, 2017. If you have a loan older than that and you itemize, you can keep deducting your mortgage interest debt up to $1 million. But if you re-fi that loan, you can only deduct the interest on the amount up to the balance on the day you refinanced – you can’t take the extra cash and deduct the interest on the excess.

Home Equity Loan Interest

You can deduct the interest on a home equity loan or a second mortgage. But — and this is a big but — only if you use the proceeds to substantially improve your house, and only if the loan, combined with your first mortgage, doesn’t add up to more than the magic number of $750,000 (or $1 million if the loans were existing as of Dec. 15, 2017).

State and Local Taxes

You can deduct state and local taxes you paid, including property, sales, and income taxes, up to $10,000.

Loss From a Disaster

You can write off the cost of damage to your home if it’s caused by an event in a federally declared disaster zone.

Moving Expenses

You can deduct moving expenses if you’re an active member of the armed forces moving to a new station. Also, for all taxpayer, if your employer pays your moving expenses, you’ll have to pay taxes on the reimbursement.

Home Office

This is a deduction you don’t have to itemize. You can take it on top of the standard deduction, but only if you’re self-employed. If you are an employee and your boss lets you telecommute a day or two a week, you can’t write off home office expenses, but claim it on Schedule C.

Student Loans

The interest on your education loan is tax-deductible on top of the standard deduction (no need to itemize). And you can deduct as much as $2,500 in interest per year, depending on your modified adjusted gross income.

 

Legal News and Case Law:

2018 was a busy year for the Michigan legislature with respect to legislation that affected our industry. Below is a synopsis of the most important bills that passed affecting our industry in 2019, much of which was passed in the “11th hour” of the “lame duck” legislative session.

  • Public Act 54 of 2017, signed June 20, 2017
    Change: Eliminates the requirement to state the marital status of a male grantor for instruments effective after April 6, 2017.
    Impact: Clarifies the recording requirements for instruments in line with the elimination of spousal dower.
  • Public Act 196 of 2017, signed December 28, 2017
    Change: Amends the Land Division Act to allow the use of a “0” or the word “all” when transferring grantee division rights.
    Impact: Causes the law to conform to current practice and removes concerns from deed preparation.
  • Public Act 330 of 2018, signed July 25, 2018
    Change: Requires the Secretary of State and the Department of Technology, Management and Budget to approve at least 1 remote online notarization platform for use in this state. Authorizes a Notary Public to use an approved online notarization platform.
    Impact: Paves the way for electronic remote real estate settlements. Standards must still be established and Registers of Deeds must agree to record. No mandated electronic recording was included so adoption may be sporadic.
  • Public Act 367 of 2018, signed December 12, 2018
    Change: Amends the Construction Lien Act to allow architects, engineers and other design professionals to file a notice of contract, which establishes potential lien rights, before any visible improvements are erected. Any subsequent lien relates back to the recording of the notice unless or until visible improvements are begun.
    Impact: Creates a new class of potential construction liens. Following MLTA’s intervention, however, a notice termination period of one year was included and priority clarification was added.
  • Public Acts 360, 361, 362, 363 and 364 of 2018, signed December 13, 2018
    Change: Establishes the right of a Notary Public to perform notarial acts electronically and authorizes a Register of Deeds to accept electronic documents for recording only from sources with whom the Register has an agreed upon verified transactional relationship.
    Impact: Opens the door to fully electronic real estate documents. Clarifies the scope by which Registers may accept electronic documents for recording.
  • Public Acts 491 and 492 of 2018, signed December 28, 2018
    Change: Allows the use of a Certificate of Trust form authorized under the Estates and Protected Individuals Code (EPIC) when conveying interests in real property from a trust.
    Impact: Supersedes the use of a Certificate of Trust Existence and Authority. Adopts the EPIC standard which allows a Certificate of Trust to be executed by a successor trustee and eliminates the need to record specific trustee powers.
  • Public Act 572 of 2018, signed December 28, 2018
    Change: Amends the Marketable Title Act to require that any instrument or notice which is intended to preserve a previously created interest in real property must refer to the instrument creating that interest by specific liber and page or other unique identifying number.
    Impact: Resolves a long standing title issue created by using warranty deeds with language such as “subject to existing easements and restrictions of record, if any.” Such deed language is intended merely to limit the scope of the deed’s warranty but is often treated as effective notice under the Marketable Title Act. Through the MLTA’s direct sponsorship, the Act was brought into compliance with the model act and with similar acts in neighboring states.

 

Corporate Settlement Solutions has many Michigan branch offices to serve you—Traverse City, Suttons Bay, Elk Rapids, Charlevoix, Bellaire, and Mt. Pleasant, in addition to providing services throughout the eastern United States.

 

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