A powerful real estate trade group has agreed to do away with policies that for decades helped set agent commissions, moving to resolve lawsuits that claim the rules have forced people to pay artificially inflated costs to sell their homes.
Under the terms of the agreement announced Friday, the National Association of Realtors also agreed to pay $418 million to help compensate home sellers across the U.S.
Home sellers behind multiple lawsuits against the NAR and several major brokerages argued that the trade group’s rules governing homes listed for sale on its affiliated Multiple Listing Services unfairly propped up agent commissions. The rules also incentivized agents representing buyers to avoid showing their clients listings where the seller’s broker was offering a lower commission to the buyer’s agent, they argued.
As part of the settlement, the NAR agreed to no longer require a broker advertising a home for sale on MLS to offer any upfront compensation to a buyer’s agent. The rule change leaves it open for individual home sellers to negotiate such offers with a buyer’s agent outside of the MLS platforms, though the home seller’s broker has to disclose any such compensation arrangements.
The trade group also agreed to require agents or others working with a homebuyer to enter into a written agreement with them. That is meant to ensure homebuyers know going in what their agent will charge them for their services.
The rule changes, which are set to go into effect in mid-July, represent a major change to the way real estate agents have operated going back to the 1990s, and could lead to homebuyers and sellers negotiating lower agent commissions.
Currently, agents working with a buyer and seller typically split a commission of around 5% to 6% that’s paid by the seller. This practice essentially became customary as home listings included built-in offers of “cooperative compensation” between agents on both sides of the transaction.
But the rule changes the NAR agreed to as part of the settlement could give home sellers and buyers more impetus to negotiate lower agent commissions.
“It may take some time for the changes to impact the marketplace, but our hope and expectation is that this will put a downward pressure on the cost of hiring a real estate broker,” said Robby Braun, an attorney in a federal lawsuit brought in 2019 in Chicago on behalf of millions of home sellers.
Analysts with Keefe, Bruyette & Woods also anticipate that the NAR rule changes will lead to lower agent commissions and could persuade some homebuyers to skip using an agent altogether.
“In our view, the combination of mandated buyer representation agreements and the prohibition of blanket compensation offers made by listing agents and sellers should result in significant price competition for buyer agent commissions,” the analysts wrote in a research note Friday.
While setting the stage for homebuyers to negotiate a more competitive price for their agent’s services, the rule changes mean home shoppers will have to factor in how to cover their agent’s compensation.
Homebuyers could still ask a prospective home seller for a concession that includes money to help cover the buyer’s agent compensation. However, a home seller with multiple offers, for example, could refuse such a request, or opt to go with a bid from a different buyer who isn’t asking for such a concession.
“The real solution is for the industry to work to remove regulatory barriers that make it difficult for buyers to include this compensation in their mortgages,” said Stephen Brobeck, senior fellow at the Consumer Federation of America.
The NAR faced multiple lawsuits over the way agent commissions are set. In late October, a federal jury in Missouri found that the NAR and several large real estate brokerages conspired to require that home sellers pay homebuyers’ agent commissions in violation of federal antitrust law.
The jury ordered the defendants to pay almost $1.8 billion in damages — and potentially more than $5 billion if the court ended up awarding the plaintiffs treble damages.
The settlement, if approved by the court, resolves that and similar suits faced by the NAR. It covers over one million of the NAR’s members, its affiliated Multiple Listing Services and all brokerages with a NAR member as a principal that had a residential transaction volume in 2022 of $2 billion or less.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” Nykia Wright, NAR’s interim CEO, said in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”
The settlement does not include real estate agents affiliated with HomeServices of America and its related companies.
Last month, Keller Williams Realty, one of the nation’s largest real estate brokerages, agreed to pay $70 million and change some of of its agent guidelines to settle agent commission lawsuits.
Two other large real estate brokerages agreed to similar settlement terms last year. In their respective pacts, Anywhere Real Estate Inc. agreed to pay $83.5 million, while Re/Max agreed to pay $55 million.
A powerful real estate trade group has agreed to do away with policies that for decades helped set agent commissions, moving to resolve lawsuits that claim the rules have forced people to pay artificially inflated costs to sell their homes.
Under the terms of the agreement announced Friday, the National Association of Realtors also agreed to pay $418 million to help compensate home sellers across the U.S.
Home sellers behind multiple lawsuits against the NAR and several major brokerages argued that the trade group’s rules governing homes listed for sale on its affiliated Multiple Listing Services unfairly propped up agent commissions. The rules also incentivized agents representing buyers to avoid showing their clients listings where the seller’s broker was offering a lower commission to the buyer’s agent, they argued.
As part of the settlement, the NAR agreed to no longer require a broker advertising a home for sale on MLS to offer any upfront compensation to a buyer’s agent. The rule change leaves it open for individual home sellers to negotiate such offers with a buyer’s agent outside of the MLS platforms, though the home seller’s broker has to disclose any such compensation arrangements.
The trade group also agreed to require agents or others working with a homebuyer to enter into a written agreement with them. That is meant to ensure homebuyers know going in what their agent will charge them for their services.
The rule changes, which are set to go into effect in mid-July, represent a major change to the way real estate agents have operated going back to the 1990s, and could lead to homebuyers and sellers negotiating lower agent commissions.
Currently, agents working with a buyer and seller typically split a commission of around 5% to 6% that’s paid by the seller. This practice essentially became customary as home listings included built-in offers of “cooperative compensation” between agents on both sides of the transaction.
But the rule changes the NAR agreed to as part of the settlement could give home sellers and buyers more impetus to negotiate lower agent commissions.
“It may take some time for the changes to impact the marketplace, but our hope and expectation is that this will put a downward pressure on the cost of hiring a real estate broker,” said Robby Braun, an attorney in a federal lawsuit brought in 2019 in Chicago on behalf of millions of home sellers.
Analysts with Keefe, Bruyette & Woods also anticipate that the NAR rule changes will lead to lower agent commissions and could persuade some homebuyers to skip using an agent altogether.
“In our view, the combination of mandated buyer representation agreements and the prohibition of blanket compensation offers made by listing agents and sellers should result in significant price competition for buyer agent commissions,” the analysts wrote in a research note Friday.
While setting the stage for homebuyers to negotiate a more competitive price for their agent’s services, the rule changes mean home shoppers will have to factor in how to cover their agent’s compensation.
Homebuyers could still ask a prospective home seller for a concession that includes money to help cover the buyer’s agent compensation. However, a home seller with multiple offers, for example, could refuse such a request, or opt to go with a bid from a different buyer who isn’t asking for such a concession.
“The real solution is for the industry to work to remove regulatory barriers that make it difficult for buyers to include this compensation in their mortgages,” said Stephen Brobeck, senior fellow at the Consumer Federation of America.
The NAR faced multiple lawsuits over the way agent commissions are set. In late October, a federal jury in Missouri found that the NAR and several large real estate brokerages conspired to require that home sellers pay homebuyers’ agent commissions in violation of federal antitrust law.
The jury ordered the defendants to pay almost $1.8 billion in damages — and potentially more than $5 billion if the court ended up awarding the plaintiffs treble damages.
The settlement, if approved by the court, resolves that and similar suits faced by the NAR. It covers over one million of the NAR’s members, its affiliated Multiple Listing Services and all brokerages with a NAR member as a principal that had a residential transaction volume in 2022 of $2 billion or less.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” Nykia Wright, NAR’s interim CEO, said in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”
The settlement does not include real estate agents affiliated with HomeServices of America and its related companies.
Last month, Keller Williams Realty, one of the nation’s largest real estate brokerages, agreed to pay $70 million and change some of of its agent guidelines to settle agent commission lawsuits.
Two other large real estate brokerages agreed to similar settlement terms last year. In their respective pacts, Anywhere Real Estate Inc. agreed to pay $83.5 million, while Re/Max agreed to pay $55 million.
WASHINGTON — Lori Shelton can’t fathom ever having the money to buy a home — and that’s a major reason why so many voters feel down on the economy ahead of this year’s presidential election.
Shelton, 67, drives an Uber to help pay rent in Aurora, Colorado. An advance on her pay covered her apartment’s security deposit. But it also cut into her next paycheck, leaving her bank account dangerously low when the rent was due — a cycle that never seems to end.
“I’m always one step behind,” said Shelton, her voice choking up. “It’s a nightmare, it’s a freaking nightmare right now.”
The United States is slogging through a housing affordability crisis that was decades in the making. At the root of this problem: America failed to build enough homes for its growing population. The shortage strikes at the heart of the American dream of homeownership — dampening President Joe Biden’s assurances that the U.S. economy is strong and underscoring the degree to which Republican Donald Trump, the former president and presumptive GOP nominee for 2024, has largely overlooked the shortage.
The lack of housing has caused a record number of renters to devote an excessive amount of income to housing, according to a Harvard University analysis. Not enough homes are for sale or being built, keeping prices elevated. Average mortgage rates have more than doubled and further worsened affordability.
In fact, the Census Bureau reported that homeownership fell slightly at the end of last year in an otherwise solid economy. If it wasn’t for shelter costs, inflation — Biden’s most pronounced economic problem — would be running at a healthy and stable 1.8%. Instead, it’s hovering around 3.2%.
Administration officials are confident that shelter inflation will soon cool, but the damage across several years is apparent to advocates and economists.
“I’ve been doing housing work for 30 years — the housing affordability challenge is the worst I’ve ever seen in my career,” said Shaun Donovan, a former secretary of Housing and Urban Development in the Obama years who now leads the nonprofit Enterprise Community Partners.
Donovan noted that this is an increasingly bipartisan challenge that could bring the political parties together. Expensive housing was once the domain of Democratic areas such as New York City and San Francisco. It’s now moved into Republican states as places such as Boise, Idaho, grapple with higher prices.
“It is a first-tier issue almost everywhere,” he said. “And that is changing the national politics around it in a way that I think is quite different than I’ve ever seen.”
Mark Zandi, chief economist at Moody’s Analytics, said that the outcome of the November election could ultimately depend on the path of 30-year mortgage rates.
Rates currently average about 6.74%. If they dropped closer to 6%, the odds of a Biden victory would increase. But rates moving near 8% might enable Trump to prevail, Zandi said.
“Given the current housing affordability crisis, higher rates will make owning a home completely out of reach for nearly all potential first-time homebuyers,” he said. “Since homeownership is a key part of the American dream, if it appears unattainable, this will deeply impact voters’ sense of the economy.”
Biden, a Democrat, acknowledged the pain many are feeling in his State of the Union address earlier this month and in his budget proposal released on Monday.
The president wants to fund the building and preservation of 2 million housing units — a meaningful sum, but not enough to solve the shortage. He also proposed a tax credit worth up to $10,000 to homebuyers. Over the past three years, he has increased rental assistance to 100,000 households.
“The bottom line is we have to build, build, build,” Biden said Monday in a speech to the National League of Cities. “That’s how we bring down housing costs for good.”
Rapidly climbing home prices were also a festering problem under Trump, who first achieved celebrity status as a real estate developer. While president, Trump called for limiting construction in the suburbs. He claimed during the 2020 election that Biden’s policies to spur building and affordability would “destroy your neighborhood.”
During the 2018 to 2020 years of Trump’s presidency, the country’s housing shortage surged 52% to 3.8 million units, according to the mortgage company Freddie Mac.
The Associated Press contacted Trump’s campaign for his policy plans but did not get a response. The America First Policy Institute, a think tank promoting Trump’s vision, said the key is to cut government borrowing to reduce mortgage rates. The former president has pledged to reduce deficits, but an analysis by the Committee for a Responsible Federal Budget shows that his policies in office will have likely added more than $8 trillion to the national debt.
“The best way for us to improve access to homeownership for young people is to get interest rates back down, not to provide subsidies that cause housing unaffordability to worsen,” said Mike Faulkender, chief economist at the institute.
Lower rates might play well with voters, but most economists say they would at best offer temporary financial relief. Purchase prices would likely adjust upward in response to greater demand from falling rates.
Construction, the more enduring solution, would take years to achieve and require new rules by states and cities. The administration is trying to incentivize zoning changes, but the major choices are outside the White House’s control.
“Even as incomes are going up and the economy is doing well and inflation is coming down, people can’t buy homes,” said Daryl Fairweather, chief economist at the brokerage Redfin. “That’s like the biggest problem for Biden because it’s not one that he can solve.”
The general rule of thumb is that people should pay no more than 30% of their income on rent or a mortgage. A typical household looking to buy a home would have to devote 41% of its income to mortgage payments, according to Redfin.
There are far-reaching economic risks because of this. High housing costs can lead people to cut back spending elsewhere. Advocates said it enables landlords to neglect their properties since there is always a ready tenant.
Evictions can worsen health and educational outcomes for children and exact an even wider cost on society, said Zach Neumann, a Denver-based lawyer who provides more than $30 million annually in rental assistance through the nonprofit Community Economic Defense Project.
The cumulative costs of evicting poorer renters are “$20,000 to $30,000 a year when you include shelter nights and emergency room visits,” Neumann said. “It’s really overwhelming when you think about the total numbers and these folks are fighting to have a roof over their heads.”
While there is bipartisan agreement on the need for more housing, there has yet to be a significant plan that has passed the House and Senate. Biden has proposed housing aid throughout his administration that never materialized.
“Had Congress passed some of the investments that the president has called for since the beginning of the administration, had they done that three years ago, as he was advocating, we’d have affordable units coming online right now,” said Daniel Hornung, deputy director of the White House National Economic Council.
But Mark Calabria, who was director of the Federal Housing Finance Agency during the Trump administration, said that many of the federal tools to increase housing such as the Low-Income Housing Tax Credit could further push up demand without adding enough construction.
“My worry would be we’ve done a number of things that increased demand when the problem is supply,” said Calabria, now an adviser with the libertarian Cato Institute.
But for renters such as Lori Shelton in Colorado, the debate about how to add housing supply is cold comfort when she owes rent now. She’s previously dealt with the threat of eviction and late fees. She gets some rent money from her son, but she has also relied at times on her church to cover the $2,399 a month.
“I don’t think the majority of us have that savings account,” she said. “If you spend that much on your rent and your groceries and your car and your bills, you don’t have much for a fallback.”
WASHINGTON — The House on Wednesday passed a bill that would lead to a nationwide ban of the popular video app TikTok if its China-based owner doesn’t sell its stake, as lawmakers acted on concerns that the company’s current ownership structure is a national security threat.
The bill, passed by a vote of 352-65, now goes to the Senate, where its prospects are unclear.
TikTok, which has more than 170 million American users, is a wholly-owned subsidiary of Chinese technology firm ByteDance Ltd.
The lawmakers contend that ByteDance is beholden to the Chinese government, which could demand access to the data of TikTok’s consumers in the U.S. whenever it wants. The worry stems from a set of Chinese national security laws that compel organizations to assist with intelligence gathering.
“We have given TikTok a clear choice,” said Rep. Cathy McMorris Rodgers, R-Wash. “Separate from your parent company ByteDance, which is beholden to the CCP (the Chinese Communist Party), and remain operational in the United States, or side with the CCP and face the consequences. The choice is TikTok’s.”
House passage of the bill is only the first step. The Senate would also need to pass the measure for it to become law, and lawmakers in that chamber indicated it would undergo a thorough review. Senate Majority Leader Chuck Schumer, D-N.Y., said he’ll have to consult with relevant committee chairs to determine the bill’s path.
President Joe Biden has said if Congress passes the measure, he will sign it.
The House vote is the latest example of increased tensions between China and the U.S. By targeting TikTok, lawmakers are tackling what they see as a grave threat to America’s national security — but also singling out a platform popular with millions of people, many of whom skew younger, just months before an election.
In a video posted on Wednesday evening, TikTok CEO Shou Zi Chew said that the company has invested to keep user data safe and the TikTok platform free from outside manipulation. If passed, he said the bill would give more power to a handful of other social companies.
“We will not stop fighting and advocating for you. We will continue to do all we can, including exercising our legal rights, to protect this amazing platform that we have built with you,” Chew said in his message to the app’s users.
In anticipation of the vote, a Chinese foreign ministry spokesman, Wang Wenbin, accused Washington of resorting to political tools when U.S. businesses fail to compete. He said the effort would disrupt normal business operations and undermine investor confidence “and will eventually backfire on the U.S. itself.”
Overall, 197 Republican lawmakers voted for the measure and 15 against. On the Democratic side, 155 voted for the bill and 50 against.
Some Republican opponents of the bill said the U.S. should warn consumers if there are data privacy and propaganda concerns, but the final choice should be left with consumers.
“The answer to authoritarianism is not more authoritarianism,” said Rep. Tom McClintock, R-Calif. “The answer to CCP-style propaganda is not CCP-style oppression. Let us slow down before we blunder down this very steep and slippery slope.”
Democrats also warned of the impact a ban would have on users in the U.S., including entrepreneurs and business owners. One of the no votes came from Rep. Jim Himes, the ranking Democratic member of the House Intelligence Committee.
“One of the key differences between us and those adversaries is the fact that they shut down newspapers, broadcast stations, and social media platforms. We do not,” Himes said. “We trust our citizens to be worthy of their democracy. We do not trust our government to decide what information they may or may not see.”
The day before the House vote, top national security officials in the Biden administration held a closed-door briefing with lawmakers to discuss TikTok and the national security implications. Lawmakers are balancing those security concerns against a desire not to limit free speech online.
“What we’ve tried to do here is be very thoughtful and deliberate about the need to force a divestiture of TikTok without granting any authority to the executive branch to regulate content or go after any American company,” said Rep. Mike Gallagher, the bill’s author, as he emerged from the briefing.
TikTok has long denied that it could be used as a tool of the Chinese government. The company has said it has never shared U.S. user data with Chinese authorities and won’t do so if it is asked. To date, the U.S. government also has not provided evidence that shows TikTok shared such information with Chinese authorities.
Republican leaders moved quickly to bring up the bill after its introduction last week by Gallagher and Rep. Raja Krishnamoorthi, D-Ill. A House committee approved the legislation unanimously, on a 50-0 vote, even after their offices were inundated with calls from TikTok users demanding they drop the effort. Some offices even shut off their phones because of the onslaught. Supporters of the bill said the effort backfired.
“(It) provided members a preview of how the platform could be weaponized to inject disinformation into our system,” Gallagher said.
Lawmakers in both parties are anxious to confront China on a range of issues. The House formed a special committee to focus on China-related issues. And Schumer directed committee chairs to begin working with Republicans on a bipartisan China competition bill.
Schumer is likely to feel some pressure from within his own party to move on the TikTok legislation. Senate Intelligence Committee Chairman Mark Warner announced after the House vote that he would work to “get this bill passed through the Senate and signed into law.”
In a joint statement with Sen. Marco Rubio of Florida, the top Republican on the intelligence panel, Warner said that “we are united in our concern about the national security threat posed by TikTok — a platform with enormous power to influence and divide Americans whose parent company ByteDance remains legally required to do the bidding of the Chinese Communist Party.”
Democratic Sen. Maria Cantwell, who chairs another panel with jurisdiction on the issue, said she would “try to find a path forward that is constitutional and protects civil liberties.”
Roughly 30 TikTok influencers and others who traveled with them spoke out against the bill on Capitol Hill on Wednesday. They chanted phrases like “Keep TikTok” ahead of the vote. They also held signs that read “TikTok changed my life for the better” and “TikTok helped me grow my business.”
Dan Salinger, a Sacramento, California-based TikTok creator in attendance, said he started creating content on the app during the COVID-19 pandemic purely out of boredom. But since then his account, which features videos about his life and his father, who suffers from dementia, has grown in popularity. Today, he has 2 million followers on the app.
“I’m actually appalled for many reasons,” Salinger said. “The speed with which they’re pushing this bill through does not give enough time for Americans to voice their concerns and opinions.”
Former President Donald Trump has spoken out against the House effort, but his vice president, Mike Pence, is urging Schumer to bring the House bill to a vote.
“There can be no doubt that this app is Chinese spyware and that a sale to a non-foreign adversary company is in the best interests of the American people,” Pence said in a letter to Schumer.
___
Associated Press staff writer Didi Tang contributed to this report.
Britons will get a tax break to encourage investment in the London stock market, the U.K. government said as it set out a spring budget that also cut workers’ employment taxes, as the Conservative party looked to boost its election hopes.
Chancellor of the Exchequer Jeremy Hunt told a packed Parliament on Wednesday that new British Individual Savings Accounts would allow an extra £5,000 in tax-free investment into U.K. equities. Rules currently allow investors to put £20,000 a year into the accounts, which are exempt from capital-gains tax.
The move is an attempt to revive the London stock market, which has been suffering from a lack of liquidity, low valuations and a scarcity of IPOs. A recent report from Calastone found that British investors are increasingly selling their U.K. holdings to purchase shares in the U.S., particularly tech stocks.
The FTSE 350
UK:NMX,
an index of large- and midcap U.K.-listed stocks, is down 2.9% over the past 12 months, whereas the S&P 500
SPX
on Wall Street is up 27.9%.
As part of the drive to encourage more investment in the London stock market, Hunt confirmed plans to introduce a new requirement that pension funds must disclose their allocations to the U.K. and said he would consider what “further action” could be taken to stimulate domestic investment by funds.
“We strongly welcome the chancellor’s announcement of a British ISA,” said Charles Hall, head of research at investment bank Peel Hunt. “It is an important initiative that should encourage saving, start to reverse the outflow from U.K. equity funds and support investment in our growth companies.”
Shares in ISA providers such as Hargreaves Lansdown
HL
and AJ Bell
AJB
rose 2.2% and 2.7%, respectively, on the news, although AJ Bell chief executive Michael Summersgill played down how much of a boost Hunt’s decision would provide the London bourse.
“Increasing investment into U.K. companies is a laudable aim, but this ill-conceived, politically motivated decision will simply not achieve that objective,” Summersgill said.
“Fifty percent of the money our customers currently invest through their stocks-and-shares ISAs is invested into U.K. assets, so this new allowance will have no impact whatsoever on their investment behavior,” he added.
Still, the FTSE 250 index
UK:MCX,
which is populated by domestically focused midcap stocks, was up 1.4% Wednesday afternoon in the U.K.
The spring budget came ahead of a U.K. election that must be held this year, with the incumbent Conservatives heading for a heavy defeat, according to polls. Capital Economics, the London-based research boutique, titled the occasion: “Jeremy Hunt goes shopping for votes.”
There were some crowd-pleasing fiscal tweaks. The most notable was a two-percentage-point cut in national insurance taxes, which according to Financial Times calculations would add £29.04 (the equivalent of $36.95) to the monthly take-home pay of someone on a £30,000 annual salary.
Hunt also extended the freeze on alcohol duty to 2025, a measure he said would support “the great British pub.” Shares of pub giant J.D. Wetherspoon
JDW
rose 2%, and smaller competitor Marston’s
MARS
added 1.9%.
Another popular measure supports reducing the cost of driving, so Hunt said he would maintain the 5-pence cut on fuel duty and freeze it for another 12 months, a move he said would save the average driver £50 next year.
In terms of spending, Hunt said the government would allocate £6 billion ($7.6 billion) in additional funding for the NHS, which included £2.5 billion to cut wait times for appointments, a particularly sore point for many Brits.
Hunt said that the government was in a position to help families with permanent tax cuts given that inflation has slowed. “Lower tax means higher growth. And higher growth means more opportunity, more prosperity and more funding for our precious public services,” he said.
The pound was little changed at around $1.2724 after the budget was delivered, though government bond yields were quite choppy, with the 10-year later trading down 1.8 basis points at 4.088%.
Concerns about extra gilt supply came after the U.K.’s debt-management office said Britain aims to sell £265.3 billion in government bonds in the 2024-25 fiscal year, higher than analysts’ forecasts of £258.4 billion, according to Reuters.
Hunt said that the Office for Budget Responsibility, the independent fiscal observer, estimated that inflation would likely fall back to the Bank of England’s 2% target in a few months’ time, a move in line with the central bank’s own forecasts.
The OBR expects the economy to grow by 0.8% this year and 1.9% next year.
I’m struggling with the idea of selling a rental property that has both a high monthly maintenance fee and a high mortgage rate. The costs to keep this house are currently higher than the monthly income it generates.
I recently refinanced in order to pull out $100,000, so now I owe $420,000 on the property, which is worth approximately $750,000.
My recent refinancing increased my mortgage rate from 5.14% to 7.9%, essentially eating up all my cash flow.
I’m on the fence. Should I sell, or should I refinance for a better rate to free up cash flow?
Losing Money Fast
‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.
Dear Losing,
The fact that you’re bleeding money from this rental is not good. You need to either bring down your interest rate or raise rents so you can turn a profit in order to make it a worthwhile investment. But keep in mind that many people are sitting on the sidelines waiting for interest rates to fall, so you might not get your desired price if you decide to sell.
Your mortgage rate is likely the biggest reason your monthly costs have jumped so much. Rates are expected to fall to around 6% or lower by the end of the year. You could refinance then, but do the math to see if it’s worth it.
You’ve already been through the wringer with refinancing, and you likely paid various application, appraisal, attorney and origination fees — in addition to closing costs — to extract that $100,000. All of that is expensive, and now you’re thinking of going through it again.
Even if you refinance again at a lower rate, would that be enough to make a profit? Were you able to turn a profit on that property when rates were at 5%? If not, would you be able to raise rents for your current tenants or perhaps find new tenants who would be able to pay more? And is the house in need of repairs or upgrades?
Unless you can make a profit on the property in the next couple of years, there’s little reason for you to hold onto it, unless you believe that it’s in an area that will experience a significant appreciation in value — you’d want to see appreciation of 20% or more, given the fees you would have to pay upon selling.
Part of your retirement plan
At the same time, a second property is nearly always a good investment. Do you think there will be considerable demand for the rental in the medium to long term? Is it in an area where you might be able to find tenants who would pay enough to cover your costs in the near term so you can at least break even? If so, it’s a good idea to try to hold onto the property, especially if it’s part of your retirement plan.
Provided that you have enough savings to help you get through this current era of 7% rates, and you have the money to refinance down the road to get your monthly costs down to a level where you can have a healthier cash flow, it may be worth keeping the home.
Selling isn’t an easy or simple decision. Because this is not your primary home, you’ll need to factor in the capital-gains taxes you would have to pay, along with 6% in real-estate commissions.
If you do decide to sell at some point in the future, you could roll that money into another like-kind property in order to qualify for a 1031 exemption, in addition to a lower rate.
The bottom line: You need to think like a real-estate investor and leave emotion out of this decision. If the property is not making money or it’s not going to at least break even at some point, you have your answer. But keep in mind that the real-estate market can surprise on the upside and that once you sell the home, you will not be able to take back that decision.
By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
The reason for the raid wasn’t immediately clear. It comes amid a federal probe related to political fundraising during Adams’ 2021 campaign.
Greco also became the subject of a probe by the city’s Department of Investigation following a report in The City, a local news site, that raised questions about her political fundraising and whether she used her position in the administration to obtain personal benefits, including free housework from a city employee.
Greco was placed on administrative leave Thursday, according to a City Hall spokesperson.
The federal investigation into campaign fundraising emerged in November after the FBI raided the home of Brianna Suggs, a top fundraiser for Adams. Four days later, agents quietly seized the mayor’s cellphones and an iPad as he was leaving an event in Manhattan.
The probe is believed to be focused, at least in part, on whether the Adams campaign conspired with the Turkish government to receive illegal campaign contributions from foreign sources, funneled through straw donors, according to a warrant reported on by The New York Times.
Adams has repeatedly deflected questions about the investigation while stressing that he has not officially been accused of wrongdoing.
“Our administration will always follow the law, and we always expect all our employees to adhere to the strictest ethical guidelines,” a spokesperson for the mayor said in a statement Thursday. “As we have repeatedly said, we don’t comment on matters that are under review, but will fully cooperate with any review underway.”
There was no immediate response to a voicemail seeking comment left at a phone number listed as Greco’s.
A spokesperson for the federal prosecutor in Manhattan declined to comment.
NEW YORK (AP) — The lyrics to “Hotel California” and other classic Eagles songs should never have ended up at auction, Don Henley told a court Wednesday.
“I always knew those lyrics were my property. I never gifted them or gave them to anybody to keep or sell,” the Eagles co-founder said on the last of three days of testimony at the trial of three collectibles experts charged with a scheme to peddle roughly 100 handwritten pages of the lyrics.
On trial are rare-book dealer Glenn Horowitz and rock memorabilia connoisseurs Craig Inciardi and Edward Kosinski. Prosecutors say the three circulated bogus stories about the documents’ ownership history in order to try to sell them and parry Henley’s demands for them.
Kosinski, Inciardi and Horowitz have pleaded not guilty to charges that include conspiracy to criminally possess stolen property.
Defense lawyers say the men rightfully owned and were free to sell the documents, which they acquired through a writer who worked on a never-published Eagles biography decades ago.
The lyrics sheets document the shaping of a roster of 1970s rock hits, many of them from one of the best-selling albums of all time: the Eagles’ “Hotel California.”
The case centers on how the legal-pad pages made their way from Henley’s Southern California barn to the biographer’s home in New York’s Hudson Valley, and then to the defendants in New York City.
The defense argues that Henley gave the lyrics drafts to the writer, Ed Sanders. Henley says that he invited Sanders to review the pages for research but that the writer was obligated to relinquish them.
In a series of rapid-fire questions, prosecutor Aaron Ginandes asked Henley who owned the papers at every stage from when he bought the pads at a Los Angeles stationery store to when they cropped up at auctions.
“I did,” Henley answered each time.
Sanders isn’t charged with any crime and hasn’t responded to messages seeking comment on the case. He sold the pages to Horowitz. Inciardi and Kosinski bought them from the book dealer, then started putting some sheets up for auction in 2012.
While the trial is about the lyrics sheets, the fate of another set of pages — Sanders’ decades-old biography manuscript — has come up repeatedly as prosecutors and defense lawyers examined his interactions with Henley, Eagles co-founder Glenn Frey and Eagles representatives.
Work on the authorized book began in 1979 and spanned the band’s breakup the next year. (The Eagles regrouped in 1994.)
Henley testified earlier this week that he was disappointed in an initial draft of 100 pages of the manuscript in 1980. Revisions apparently softened his view somewhat.
By 1983, he wrote to Sanders that the latest draft “flows well and is very humorous up until the end,” according to a letter shown in court Wednesday.
But the letter went on to muse about whether it might be better for Henley and Frey just to “send each other these bitter pages and let the book end on a slightly gentler note?”
“I wonder how these comments will age,” Henley wrote. “Still, I think the book has merit and should be published.”
It never was. Eagles manager Irving Azoff testified last week that publishers made no offers, that the book never got the band’s OK and that he believed Frey ultimately nixed the project. Frey died in 2016.
The trial is expected to continue for weeks with other witnesses.
Henley, meanwhile, is returning to the road. The Eagles’ next show is Friday in Hollywood, Florida.