The Silver Tsunami In Real Estate

The “Silver Tsunami” is a metaphor used to describe the increase in aging population in the U.S.—particularly synonymous with the Baby Boomer generation. There seems to be a growing consensus that the real estate market will experience a large boost in housing supply throughout the coming two decades as a result of the Silver Tsunami.

The Baby Boomer generation is notably one of the largest populated generations of U.S. history. It was considered as high as 80 million, far outsizing the subsequent Generation Xers at 55 million. It’s estimated that nearly one-third of the housing supply throughout the U.S. is currently held by the Boomer population. These numbers make sense when examining the size of the Boomer population for the large amount of real estate holdings held by this generation; and why many believe real estate inventory has become traditionally low year over year for the last two decades.

Historically, members of the Boomer generation are choosing to work longer because they are healthier, more active and deferring retirement in order to finance longer retirements. This has led to, and is leading to, the decisions to stay in their homes longer. Because so many in this generation owe little to nothing on their homes, they’re choosing to make upgrades to their existing homes and are favoring outfitting their homes to make them conducive for aging in place.

Another factor enabling the Boomer generation to stay in and own their homes longer is the reverse mortgage. It’s defined as a type of mortgage in which a borrower over the age of 62 can take a long-term loan which relinquishes the equity in the home in the form of monthly payments and is repayable when the home is eventually sold. Many homeowners of the boomer generation are using this loan program as a tool to supplement retirement income, allowing them to remain in their homes for much longer periods of time.

There are many who theorize that in the coming decades, the real estate market as whole will experience a substantial shift in available inventory nationwide. This so called Silver Tsunami will be a result of Boomers passing away, choosing to downsize or making the move to retirement and/or long-term medical care facilities. It’s estimated that nearly 1 million existing homes will hit the market each year through 2037. Some believe that this influx in existing home inventory over the coming decades will result in a normalized market and larger amounts of affordable housing inventory nationwide, thus easing this housing “crunch.”

While the theory of the Silver Tsunami having a tremendous impact on the housing supply holds water, there is little quantifiable data to date that substantiates any theory of the impact on the real estate market as a whole. We have yet to see enough data to measure the effect on housing affordability. While it’s a trend worth watching, don’t wait for this theorized windfall of affordable inventory to hit the market, as there is a real likelihood that a buyer could be waiting decades.


Also view this on The Source.

Looking To Buy A Home In The Winter Months?

Shorter days, the crisp air with twinges of bitterness, traces of white appearing in the Cascades and the barren trees are the annual indications that winter is tiptoeing its way into Central Oregon. Before long, as in its usual fashion, winter will no longer hold off its arrival and Central Oregon will be in full swing of the season, complete with the opening of Mt. Bachelor.

Is this really the time of year to purchase a home? The idea of bundling up and traipsing about town to look at housing inventory may feel as though it is embarking on a fool’s errand. Everyone knows that the best time to purchase a home is in the spring and summer months, right? In the words of Lee Corso, longtime ESPN analyst, “Not so fast, my friend!”

While it’s true that the real estate market as a whole tends to slow during the winter months, that is not necessarily a bad thing for buyers. Does it take a little more effort to get out and look for a home in the bitter cold of winter? Yes. Does there tend to be less inventory during the winter months? Also, yes. And then there is the conundrum of trying to move during a snowstorm. All reasons why one may think that this is not the season to be looking to purchase a home. However, I would argue that this may be one of the smartest times to purchase.

First, there is far less competition in the marketplace during winter months. According to the National Association of Realtors, 40% of home sales take place May through August. Granted, there is traditionally more inventory during the spring and summer months; there are also more buyers competing for said inventory. This translates to the likelihood of buyers having to compete with multiple-offer situations, all-cash offers and buyers who may have stronger financing positions that require less seller contribution or potential appraisal hurdles. More buyers equates to increased opportunity for a seller to consider an offer that is not “their ideal.”

More than likely, a seller who has listed their home for sale in the winter months seriously wants or needs to sell the property. This potentially gives a buyer some room with negotiations on terms and price. A word of caution: just because a seller may be eager to sell doesn’t mean that they will be open to low-ball offers, out-of-the-ordinary terms or unreasonable demands. A buyer can sabotage themselves with this strategy, so it’s important to work with a Realtor and rely on their professional experience to decide on the appropriate negotiation strategy.

Another advantage to purchasing a home in the winter: a buyer can put the home through the paces. The winter months give a buyer the perfect opportunity to evaluate the home in some of the worst climate conditions. A buyer will be able to see what the home looks like in the most barren of months. What does the property look like without the leaves on the trees and shrubs? Where are the opportunities for ice dams? What are the neighborhood streets and driveway like during incidents of snow? Does the home feel drafty and cold? And one could go so far as (in December, anyway) to answer the question of what height of Christmas tree will fit in the living room.

There are definite and unquestionable advantages to purchasing a home in the winter months. If a buyer is willing to put on the puffy coat and boots, they may just find the opportunity for the home of their dreams. And, what’s not to love about spending the spring and summer months in that home; rather than spending the longer, warmer days looking for it?

Also see this in The Source.

Thinking About Investment Properties?

Many have heard that owning investment property is a great way to build wealth. There is truth to that statement; however, having investment property isn’t like trying a new food. One can’t just jump on the investment wagon and hope for the best. There are many factors to consider: return on investment, reserves, management, vacancy rates, maintenance—and of course whether one can afford the additional expenses are all factors that require consideration when buying investment property.

Below are some suggestions for things to explore when considering buying an investment property.

Talk with other investors: It’s important to ask people who are experienced with investment properties: How did they do it? Would they do it again? What would they do differently? What are their suggestions for considerations when looking at various market sectors?

Talk with a financial advisor: A conversation with a financial advisor should be among the first steps when considering the purchase of investment property. They have a keen understanding of one’s financial situation, financial goals and can be a guide to achieving those goals. A financial advisor will be able to help assess an investor’s asset base, tax advantages and consequences. We’re talking about an investment of hundreds of thousands of dollars, so it’s vital that there’s a clear understanding of what the goal for the investment property is in long-term financial planning.

Research the ever-changing market in the target investment area: Real estate markets differ from city to city. It’s important to talk with a Realtor who has detailed knowledge and experience with rental markets in the area, ROI calculations and considerations, high performing rental types and landlord-tenant law. Landlord-tenant law is key when looking to purchase investment properties, particularly when trying to understand rent increases and market rents.

Research management companies: Interview property management companies in the area about the costs involved in having a rental property. What are the fees and costs associated with the management of rental properties? What is the average vacancy rate for the rental market in the area? What are additional costs of owning rental property? For example, does the tenant or property owner pay for utilities, landscaping and repairs? What are the responsibilities as an owner versus a property management company?

Speak with a lender about the requirements to buy investment property: Investment property loans require much larger down payments than a mortgage for an owner-occupied property. The typical down payment required is 30% of the purchase price and has different requirements when it comes to a loan. It’s important to speak with a lender to gain an understanding about loan options, lender requirements for investment property—and most importantly, if one can qualify to buy rental properties.

A local real estate professional is one of the best resources one can have in terms of helping to guide a potential investor through the suggestions above. Utilize their expertise and resources to help gather information when considering purchasing investment property.


Also see this in The Source.

Truth In Real Estate

Every property has idiosyncrasies, and certainly, every home is not perfect. It’s highly likely at some point during homeownership something has occurred that will need to be disclosed when selling the property. As a broker, I have yet to meet a seller who hasn’t expressed apprehension about disclosing potential and past problems that could influence a buyer’s decision. This apprehension begs the question: what and how much does a seller tell, not only their broker, but also potential buyers?

Purposely withholding pertinent information about a property likely will land a seller in a serious conundrum that most certainly can/will lead to a sale fail and possibly legal ramifications. There have been many instances of lawsuits across the country in which sellers have paid significant amounts of money to buyers, because the seller was not forthcoming or honest with pertinent information about the property.

Think of it in a parallel to online dating. A person sees a profile that interests them. Everything looks good and there is a certain level of trust that the other party is being transparent and forthcoming; and then, they meet, and it turns out that the information given was less forthcoming. My point in using this analogy is that more often than not, the reality of a situation will eventually come out; be it when selling a property or online dating.

Real estate brokers are employed not only to help one sell their property, but also to help protect a seller from potential issues before, during and after a transaction. I cannot stress enough how important it is to discuss all potential issues with one’s real estate broker. Realtors are here to help guide a seller through the process, protect them from potential sale fails due to failures to disclose and mitigate possible disclosure issues.

Some of the more common disclosure areas are lead-based paint, pests, fire and mold/water damage. Regarding water damage (especially within the last three years in Central Oregon and the amount of water damage resulting from severe winters), I cannot stress enough the importance of disclosing any history of water damage or mold. First because, it more often than not will come up in an inspection report and second, because a buyer can request a CLUE (comprehensive loss underwriting exchange) report. This allows the buyer to see any insurance claims that have been made on the property in the last seven years.

Other areas that are important to disclose upfront are things like permitting. Are there any structures built or major remodels to the property that have not been permitted? This one is a big one for buyers, as it determines potential liability to remedy a non-permitted structure down the road. It also can determine insurance coverage and liability. A buyer has the right to know the facts regarding permitting so that they may make their own educated decision on those facts as they move forward.

There are several other examples of disclosure issues. It is crucial to disclose to your real estate broker any potential issues and trust their guidance and knowledge. Realtors cannot protect you from what they don’t know. The rule of thumb is to disclose everything you know about the property. Better to be open, rather than have the proverbial skeletons dancing out of the closet later down the road.


Also read this article in The Source.

The “Dos And Don’ts” During The Loan Process

When getting ready to purchase a home, a buyer needs to get a prequalification or preapproval letter from their lender. The thing to remember, is that these “prequalifications and preapprovals” are just that…the beginning stage of the loan process. These letters DO NOT mean that a buyer is 100% approved for the home loan. As such, there are things that may affect the outcome of your loan request. There are certain “Dos and Don’ts” that remain in effect before, during and after loan approval until the time of settlement when the loan is signed, funded and recorded.

As a buyer it is crucial that nothing is done that may alter a credit report. This is because, many times a buyer’s credit report, income and assets are verified within hours of the buyer signing final loan documents, and any changes may put obtaining the loan at risk. Not only could these changes put your loan at risk, it can also put the earnest money deposit at risk.

The Don’t List:

• Absolutely do not quit or change jobs. Without a proven and steady source of reliable income, it is likely the loan will get denied.

• Do not allow anyone to make a credit inquiry, with the exception of the lender.

• Do not apply for credit anywhere else, except the lender. Applying for credit creates inquiries on the credit report and reduces the credit score. Thus, it can have a detrimental effect on the lender’s determination of creditworthiness.

• Changing banks or transferring money within an existing account can raise serious red flags. A buyer needs to keep their accounts open and with limited changes during the loan process.

• Never co-sign for anyone, for any reason, for anything! It may be that a buyer wants to help their child purchase a car or rent their first apartment. No matter how much a buyer wants to help, do not do it, as that debt reflects on a credit report and becomes a factor into the buyer’s debt-to-income ratio.

• This next one is crucial. I have seen it happen: A buyer gets preapproved for a loan and then gets so excited and goes out to purchase the perfect living room set for their new house. Or the perfect car for the new garage. No matter how much it may seem like a good idea; it is NOT! Do not purchase anything else on credit; not a car, truck, boat, furniture or other real estate. Purchasing on credit directly affects the debt-to-income ratio, and lenders definitely do not look favorably on new debt.

• Coinciding with the above, do not charge large or abnormal amounts to existing credit card accounts.

• Finally, do not send in any late payments or incur late fees for anything!

Now, what does a buyer DO during the loan and escrow process?

The “Do” List:

• Absolutely, with no exceptions, a buyer needs to keep all accounts current, including mortgages, car loans, credit cards etc.

• If any questions arise, contact both the lender and real estate broker immediately.

• Make all payments on or before the due dates of all accounts.

• Stay in direct contact with buyer’s broker, lender and escrow officer. Meaning, if they call or email, make it your first priority to get right back to them.

Following these guidelines will help to manage the loan process and create a smooth path for loan approval.

Also see this column in The Source.

Be Prepared for the Unexpected Delay

The dream property is in escrow, the home inspection contingency has been removed and it looks like it’s smooth sailing to close the transaction. What could go wrong? Is there anything that can delay closing and moving dates?

It was late May 2017 and I was working on the listing side of a transaction that was set to close in three days. It seemed like everything was going smoothly and on time. Then a freak spring storm graced Bend with howling winds and a torrential downpour of rain. Thirty minutes after the storm hit, I got the call—the call no real estate broker, or anyone else, for that matter, wants to receive from the Bend Police Department. An officer told me a tree had fallen onto the roof on what appeared to be a property I had for sale.

My stomach took an immediate free-fall dive to my toes. As I drove up the street to the house, there it was; a 100-foot Colorado blue spruce with a 9-foot-wide root ball freed from the ground, the tree lying on the house. The tree had punctured the roof and eaves on the southeastern corner of the roof. Its precarious position was all that stood between it and the neighboring home.

I tell this story as a precautionary tale to be prepared that not all escrows will close on time. This is an extreme and colorful example. That said, it was a situation that was out of anyone’s control and resulted in the delay of close. Thankfully, the sellers and I were able to work swiftly to remedy the situation and the buyer hung in there to close a week and a half later.

There are several things that can delay a closing. More often than not, they’re out of the buyer’s and seller’s control.

Appraisal-related delays are one of the most common reasons a closing date gets delayed. If an appraisal comes back late, or outlines conditions that must be met in order for the property to meet lender requirements before a loan application can go to final underwriting, it can cause delays.

Also causing delays are vendors not completing repairs within the time frame necessary to close. Sometimes there are repairs negotiated between buyer and seller to be completed before close of escrow, including plumbing, roofing or electrical repairs. As many of us have experienced in recent years, vendors are booked out and oftentimes cannot meet the time constraints of a pending sale. As a result, the escrow closing may be delayed in order to get the necessary repairs completed.

A lender’s underwriter may also require additional documentation or verifications of employment prior to close of escrow. The inability to obtain these documents in a timely manner could delay final loan approval and the close of escrow.

Buying and selling a property is an exciting and stressful process, so it’s best to be prepared for anything. From my experience in this industry, and as my experience with the fallen tree demonstrates, I’ve learned that anything truly can happen.

Landlord/Tenant Law: Part 2

My last column on landlord/tenant law covered 24-hour notices, transfer of leases and lease buyouts. As I mentioned then, when purchasing or selling a tenant-occupied property, it’s crucial to be aware of state landlord/tenant laws. An incorrect step from a landlord can result in a massive headache and potentially financial loss.

It’s also important to be aware of the new laws and regulations under SB608, the recently passed law concerning rent control, rent increases and ban on no-cause evictions.

Rent Increases: Under the new laws of SB608, a landlord may only increase rental rates once per calendar year. In addition, the rental rate can only increase by 7% plus Consumer Price Index. For 2019, that dollar amount is equal to approximately 10.2% of the current rent rate. This formula and rent stabilization law apply to all landlords statewide. The only exemption to this law is landlords whose dwellings are fewer than 15 years old. Properties that are fewer than 15 years old are not held to the rent stabilization law, and as such, don’t have to abide by the 7% plus CPI standard when raising rents. It’s important to note that all rent increases must be given in writing with no fewer than 90 days’ notice.

Notices of Termination: Of the questions I’m asked by buyers and sellers of tenant-occupied properties, termination of tenancy and notice of termination of tenancy tends to be one of the more confusing areas. This is particularly true under the new laws of SB 608.

When a tenant has occupied the dwelling for fewer than 364 days, a landlord, under the law, can issue a 30-day notice of termination of tenancy without stated cause. This notice can be issued up to the 364th day of tenancy. This applies to both leases and month-to-month agreements. For example: A tenant moves in on Aug. 15, 2018. On Aug. 14, 2019, a landlord may issue a 30-day notice to vacate and will be valid under Oregon law.

What happens when a tenant has occupied a dwelling for 365 days or more?Once a tenant has occupied for more than one year, under the new laws of SB 608, a landlord may not terminate tenancy without cause. There are only four exemptions to this law: 1. The property owner/landlord intends to demolish the unit or convert it to a use other than residential. 2. The property will undergo major repairs or renovations that will make the dwelling unfit/unsafe for occupancy. 3. The landlord or landlord’s immediate family intends to occupy the property as a primary residence. 4. The landlord is selling the property, has an accepted offer from a buyer who intends to occupy the property as their primary residence. In all of these cases, a 90-day notice must be served and in the case of exemption 4, the landlord must provide evidence of the offer to purchase within 120 days of acceptance of the offer to purchase.

It’s important, when looking to purchase or sell a property that is tenant occupied, to be clear on the laws protecting tenant rights. I highly suggest working with a broker who has significant experience working with tenant occupied properties, as well as one who is well versed in landlord/tenant law. Do the research when choosing a broker; it will save tremendous headaches in the long run.

Also, see my column in The Source.