Downsizing and Relocating

Plus the REALTOR Compensation Update

By M.C. Dwyer

Selling and then buying another home can feel more daunting as people get older. They often need mortgage advice and tax and estate planning as well as assistance preparing the property for market. Still, surveys show up to 30% of homeowners 62 or over are considering moving! Many in the 60+ group have been in their homes 20, 30 and even 40 years…developing deep emotional ties to their home, where many of their most cherished memories were made. They also may have misconceptions about reverse mortgages, which have evolved over the years and may be worth considering, depending on circumstances. It takes patience, respect, and gentle reassurances from a steady and reliable REALTOR and team of advisors to help smooth their transition from their old home to their new home.

Meredith Whitney (called the “Oracle of Wall Street” for predicting the 2008 financial crisis), recently discussed growing financial strains among households over age 60 with Yahoo! Finance. Unlike many experts who think that California’s tight housing supply and high prices will persist because people would rather keep their low mortgage rate versus buy at today’s 30-year mortgage rates of 7.45%, her analysis reveals that the over 60 group has accumulated much more debt than compared to 20 years ago. Combining those higher debt payments with rocketing fire insurance costs may cause some in the 60+ group to want to buy smaller, less expensive homes (downsize), or perhaps, using proposition 19, relocate and carry their low property tax basis anywhere within California, perhaps closer to family. If her analysis is correct, we may see rising housing supply and sales activity from that demographic. I wonder if the effects of climate change (harsher winters for example) may also lead some homeowners to trade their Santa Cruz Mountains homes for easier locations.    

REALTOR® Compensation

A month has gone by since the National Association of REALTOR®S (NAR) announced their proposed legal settlement, which still awaits court approval. Given the changes are slated to go into effect in July, the best minds in the industry are planning and problem solving the settlement terms. We believe the main changes will be twofold: 1) Home buyers will need a written compensation agreement with their buyer’s agents prior to viewing properties, and  2) Buyer’s agent compensation will no longer be published in the MLS. No sense pointing out that NAR never promoted any level of compensation – definitely not 6% – and that their proposal only adds time consuming work for agents to research what used to be published, further clouding the compensation issue.    

Traditionally buyer’s and seller’s agent compensation was built into the property price, and so could essentially fold into the buyer’s loan. The fee for buyer’s agents used to be negotiated between the sellers and their agents in their listing agreement. Now, buyers will decide how much to pay their agents before viewing properties. Next, buyer’s agents will negotiate their fee with the seller’s agents to minimize out-of-pocket costs for their clients, who are often already cash strapped after saving for their downpayment and closing costs. It’s yet to unfold, but I expect there may be collateral damage from the NAR settlement: more buyers may try to save money and buy without agent representation. To me, that’s like showing up to court representing yourself while the other side is represented by experienced attorneys. Many seller’s agents are uncomfortable with the prospect of representing the buyer and the seller, since their positions are naturally opposed. The impact of an agent’s inability to negotiate their fee with the seller’s agent may be felt most heavily by people of below average means, often first time homebuyers. The affluent are the most able to pay for representation. Did you know that about 30% of all home purchases are all cash?

We’ve all heard horror stories about agents who essentially disappeared after getting their buyers into contract to buy a home. Arguably, that kind of work ethic doesn’t merit much compensation. My hope is that non-performers will fall to the wayside, while those with great track records and successful procedures honed over the years will succeed. For example, my personal transaction checklist for clients has grown from 40 to 60 tasks and milestones, based on transactions over the last 20 years. Our Transaction Coordinator tracks the routing and signatures on around 70 separate disclosures, advisories, consents, reports and other essential documents. We take the time to explain everything to our clients so they can make informed decisions. 

Our Rebuild 

Although Mark completed his 2020 CZU Lighting Fires rebuild last year, we are still in limbo with the SBA Loan process which we appealed last winter to help with unforeseen cost overruns. Mark had to tap his retirement account to pay the contractors. This will be challenging since it took about 1/3 of his retirement and all that money is taxable. We’ve no idea if or when that loan will come through.

Since last month, another four homes were rebuilt, bringing the total to 69 out of the over 900+ homes lost to the fires. 145 (up 2) permits have either been issued or are ready, and 226 permits are in process, down from 266 last month.

Send your questions and topic requests to “M.C.” (MaryCatherine) Dwyer, MBA, REALTOR® 
(831) 419-9759   E-mail: mcd@mcdwyer.com   Website: https://mcdwyer.exprealty.com
CA DRE License 01468388   EXP Realty of California, Inc.

Serving San Lorenzo Valley and Scotts Valley since 2005                                                                                               

Sources: California Association of REALTORs, CNN, MLS as of 4/15/2024, Mercury News, Mortgage News Daily, National Association of REALTORs, Redfin, Reuters. Yahoo! and Zillow.
santacruzcountyca.gov/FireRecovery/RecoveryPermitCenter/RecoveryPermitCenterDashboard.aspx

The statements and opinions contained in this article are solely those of the individual author and her sources, and do not necessarily reflect the positions or opinions of eXp Realty, LLC, or its subsidiaries or affiliates (the “Company”). The Company does not assume any responsibility for, nor does it warrant the accuracy, completeness or quality of the information provided.