California Realtors gear up for changes in August

By Jeff Lazerson | jlazerson@mortgagegrader.com | MortgageGrader.com | July 29, 2024

Article originally posted in Orange County Register on July 25, 2024.

August brings big change to our real estate industry, which I learned recently was top-of-mind for agents hosting open houses.

Also hot topics of conversation: contingency sales and cash-poor buyers.

Coldwell Banker agent, Cara Ameer, had the California Association of Realtors new rules about buyers’ representation on her mind.

“It’s a major practice change,” she said.

House hunters working with real estate agents in California will be asked to sign a buyers’ representation agreement as of Aug. 13, she told me.

“A lot of brokerages will have their own agreements. It’s going to be the Wild West for a while,” she said.

Here are some of the highlights of the new Aug. 13 agreement, according to Ameer:

—The buyer’s agent term is negotiable, but it cannot be more than three months.

—It’s just like a listing contract, only this one is for a buyer.

—Brokerage commissions, as outlined in the broker compensation advisory form, can come from the seller or buyer or both.

—The buyer’s agreement can be exclusive or non-exclusive, meaning you can work with one agent or more than one agent.

—The commission rate is negotiable.

Turnkey homes also are selling the fastest, agents tell me.

“People aren’t wanting to do anything,” said Dawn Wood, a real estate agent at Coldwell Banker. The property has to look pristine, like a model home,” “I’m seeing a lot of all cash buyers coming through open houses.”

If you don’t have the money or don’t want to use your money to fix up the home, Wood offered a solution.

Coldwell Banker and most of the large real estate brokerages have programs allowing sellers to get 12 months of interest-free financing for repairs. The contractors get paid at close of escrow when the home seller sees those expenses deducted at closing.

“We are competing with new homes,” said Wood.

Wood provided one example where her client invested $60,000 in repairs and made an additional $600,000, selling for $2.1 million.

You may also be able to find independent contractors willing to cover the repair costs upfront and get paid at closing. Shop and compare pricing, quality, and service levels.

Buyers who walk in with contingencies, such as their home is also listed for sale, will meet some roadblocks.

Annette Moraga Drake, another Coldwell Banker agent, explained the difficulties for such a buyer, who make offers based on exiting their current home.

“If they want to find something, it will be a more competitive (attractive) offer if they don’t have a contract with a contingency,” said Drake. “If homes have been on the market for more than 30 days, they (sellers) start looking for contingent offers.”

Drake pointed out that bridge financing is one workaround for contingent buyers.

Simply stated, you pull equity out of your departing residence to buy the up-leg home first — without it being contingent on the sale of your home. You close escrow on the up-leg, then sell your departing residence and pay off the bridge loan.

Bridge financing is very expensive in terms of high rates and points, as the lender is not making money over time because the loan will be paid off quickly.

Lastly, if you can find a fixer-upper, these properties are selling well, too.

“Total fixers are selling well because people who have cash are (fixing up) and flipping homes,” said Anthony Zueck, a broker associate at Bullock Russell. Many of these sell to cash-poor buyers.

Freddie Mac rate news: The 30-year fixed rate averaged 6.78%, 1 basis point higher than last week. The 15-year fixed rate averaged 6.07%, 2 basis points higher than last week.

The Mortgage Bankers Association reported a 2.2% mortgage application decrease compared with one week ago.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $766,550 loan, last year’s payment was $15 more than this week’s payment of $4,987.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.625%, a 15-year conventional at 5.625%, a 30-year conventional at 6.125%, a 15-year conventional high balance at 5.99% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year high-balance conventional at 6.5% and a jumbo 30-year fixed at 6.75%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye-catcher loan program of the week: A 30-year fully amortized jumbo, fixed for the first five years at 5.99% with 30% down at 1 point cost.

Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.

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* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.