(Photo by Chris DELMAS / AFP) (Photo by CHRIS DELMAS/AFP via Getty Images)
The U.S. is in the midst of a housing supply crisis, with rents skyrocketing and the number of first-time homebuyers who can qualify for a mortgage on even a starter home shrinking. Who is to blame for this mess? The Democrats who run the US House Financial Services Committee have identified a convenient villain: corporate investors.
The committee held a hearing today, and the name of the session is the giveaway: “Where Have All the Houses Gone? Private Equity, Single Family Rentals, and America’s Neighborhoods.” Indeed, corporate investors have purchased hundreds of thousands of single-family homes across the country over the last decade, making it harder for Millennials, Gen Z and other first time buyers to break into the market.
But, some experts, including a key one at the hearing, argue that the problems with the housing market run much deeper; they pin the housing shortage and rising rents on the lack of new home building since the Great Recession.
“The growth of institutional investors is a symptom, rather than the cause, of extremely tight housing markets,” Jenny Schuetz, a senior fellow at Brookings Metro said in her statement to the committee. “Institutional investors benefit from tight housing supply, but they did not create the problem.” (Brookings Metro is an initiative of the Brookings Institution focused on the future of the middle class.)
The problem began with the housing bust and the Great Recession, according to Schuetz and other experts. The U.S. built fewer homes in the 2010s than in any decade since the 1960s. Foreclosures left many homes empty and deteriorating. But the decimated home building industry never ramped new residential construction back up to meet the needs of future homebuyers. Those builders who did survive the Great Recession faced growing zoning and cost challenges.
“Exclusionary zoning rules make it difficult to build in places where there’s a lot of demand for new homes, like big urban areas,” Mark Zandi, chief economist at Moody’s Analytics, said in an interview. Zandi added that many growing suburban areas have restrictions on building multi-family housing and that higher permit costs have made it more expensive to start new residential construction.
Meanwhile, as the economy grew over the last decade–and aging Millennials married and started families–the number of would-be first time homebuyers grew. The combination of a lack of new entry-level homes and more buyers drove up home prices and rents.
“The surge in housing values, house prices, and rents has supercharged the institutional investor demand for homes,” Zandi observed.
While the private equity industry didn’t cause the housing crunch, Zandi and others agree that institutional investors have exacerbated the problem, especially for minorities, lower-income families, and first-time homebuyers.
Institutional investors first entered the single family rental market after the Great Recession when they started buying up foreclosed homes. Their interest spiked during the Covid housing boom–the pandemic led to lower interest rates, trillions of dollars in stimulus, a rise in demand for single-family homes, and supply chain disruptions which made construction more expensive. All those forces pushed up house prices.
“Institutional landlords have seized the COVID-19 pandemic as an opportunity to expand their reach even further into our homes,” Sofia Lopez, a deputy campaign director at the Action Center on Race and the Economy, said in her statement. “Private equity’s business model hinges on boosting revenue, cutting costs, and maximizing efficiencies…This is a recipe for disaster: in housing, it translates into exorbitant rent increases.”
Corporate investors made 28 percent of all single-family home purchases nationwide in the first quarter of 2022, up from 19 percent in the first quarter of last year, according to the Harvard Joint Center for Housing Studies. The problem is particularly acute in booming Sun Belt markets, where investors have raised rents by up to 39 percent over the last year, according to CNBC.
Many of these corporate investors are backed by massive private equity firms. Invitation Homes, which owns a nation-leading 82,000 single-family homes, is backed by the Blackstone Group
BX
Families looking to enter the market have struggled to compete. “Deep pockets and ready access to capital markets allow them [institutional investors] to outbid individuals,” Schuetz said. This has been true for years, even before mortgage rates started rising, with average 30-year fixed rates now around 6 percent, the highest since 2008.
A variety of policy solutions have been put forward by the Biden Administration and others, including increased investments in public housing, tax incentives for institutional investors to sell properties to families, relaxed zoning laws, and tax breaks for home builders.
A May housing proposal by the Biden Administration states its goal is to “Work with the private sector to address supply chain challenges and improve building techniques to finish construction in 2022 on the most new homes in any year since 2006.” Among other things, the proposal aims to leverage funding from last year’s infrastructure bill by assigning Department of Transportation funding to affordable housing.
But those are just fixes around the edges. “We’re going to see institutional Investors grab a larger share of the housing stock. I don’t see that changing anytime soon,” Zandi says. “The only fundamental solution goes back to the fundamental cause: We need more [housing] supply.” That, of course, would help damp down rising prices and make housing less attractive to private investors.
For now, however, the trend is in the wrong direction. Residential construction decreased last month, likely due to rising mortgage rates, and some experts believe that number will remain low for much of the year.
East Africans interested in home ownership still have to walk a tortuous road even with the obvious shortfall in provision of affordable units.
Ugandans and Kenyans are particularly hard hit, with realtors in Kampala terming Bank of Uganda’s (BoU) decision to cap the loan to value ratio on residential mortgages and land purchases at 85 percent a tight lending condition that will translate into higher interest rates for housing loans.
In Kenya, the property market is facing uncertain times over falling investments and reduced demand for home ownership as growing inflationary pressures, both locally and globally, hit consumer incomes.
Investments in the sector through the Nairobi Securities Exchange are also attracting investor apathy. Kenya’s efforts to promote investments in the property market through the real estate investment trusts (Reits) are facing difficulties largely due to a punitive taxation regime, cumbersome and multiple land laws and high compliance and listing costs.
Read: Kenyan MPs double tax on sale of property and securitiesA recent survey by the Kenya Bankers Association shows that investment in the property market is shrinking while the demand has also fallen.
Between October to December 2021, house prices declined at a much faster rate than the third quarter, according to the Kenya Bankers Association-House Price Index .
The prices contracted by a higher rate of 3.99 percent during the fourth quarter, compared with a contraction of 3.7 percent July to September“The steady decline in house prices broadly reflects the headwinds in the economy that influenced both demand and supply characteristics of the market,” the survey says.
Low investmentsThe sharp drop in prices during 2021 reflected subdued investments that limited the rollout of new supply as demand remained low.
Early this month, the Bank of Uganda raised its benchmark rate to 7.5 percent among other loan conditions, which are set to further stress Uganda’s real estate developers and potential home owners.
The developers are also taking issue with policies by the government such as taxation on purchase of land and the landlord/tenant bill.“On paper, lenders advertise 17 percent to 19 percent, but when you enter a banking hall, mortgage financing is out of reach for many ordinary Ugandans at over 24 percent including fees,” says Nicholas Arinaitwe, executive director of Real Estate Institute of East Africa.
Uganda shortageWhile Kampala has seen many high-rise commercial buildings, Mr Arinaitwe says most developers opt for lowly priced short-term loans to fund these.
Uganda’s housing loan book expanded by a paltry 1.3 per cent in the first four months of 2022, BoU lending data shows. Residential mortgages expanded from Ush15,564 billion ($4.1 billion) to Ush15,767 billion (4.2 billion.
Michael Mugabi, managing director of Housing Finance Bank, blames the slow pick up of the EAC mortgage market on the Covid-19 pandemic.“On the positive side, we are beginning to observe a persistent increase in sector activity, which is likely to be sustained over the long term, driven by improvements in the activity across other sectors of the economy,” Mr Mugabi says.
Bank Populaire du Rwanda Managing Director George Odhiambo notes that demand for housing exists but affordability remains a challenge due to incomes disruptions in the last two years.
The Democratic Republic of Congo faces the highest housing backlog in affordable housing finance in the region with a deficit of four million units.
Tanzania closely follows with a deficit of three million units, Uganda 2.4 million, Rwanda 2.3 million units and Kenya two million units.
In Uganda, realtors say the country produces an estimated 60,000 housing units against a demand of 200,000 housing units a year.
Rwanda borrowed concessional loans to create liquidity in commercial banks to start offering long term financing to the housing sector. The $150 million five-year Rwanda Housing Finance Project partly financed by World Bank has pushed downwards the mortgage rates to an average of 15 per cent per annum for commercial banks.“There are schemes like Rwanda Housing Finance Project that go as low as 12.5 percent and there are highs of 17 percent per annum,” notes Mr Odhiambo.
But he says construction loans for residential units are higher at 18 per cent given the risks.
According to FinScope 2020, about 149,000 households in Rwanda have mortgages.
Low mortgage uptakeIn Kenya, the outstanding value of non-performing mortgage loans increased to Ksh 28.3 billion ($241.88 million) from Ksh 27.8 billion ($237.6 million) in December 2020, according to the central bank.
The number of mortgage loans declined to 26,723 from 26,971 mainly due to a higher number of mortgage loans that were repaid compared to the number of new mortgage loans granted in the year impacted by Covid-19 pandemic and low levels of income.
The average interest rate charged on mortgages increased to 11.3 percent from 10.9 percent.“While there are certain headwinds facing global debt and equity markets as well as geo-political tensions, we are confident that the East African property market offers clear value for investors wishing to make risk-adjusted returns in frontier markets such as Kenya, Tanzania and Uganda,” said Somaya Joshua, head of Africa regional operations at Absa Corporate Investment Banking.
According to Cytonn Investments Ltd investors in Kenya are expected to be more conservative in the residential market sector due to the upcoming general elections on August 9.
The investor firm noted that its outlook for the REITs market is ‘negative’ due to the continued poor performance of the Fahari I-REIT, which is the only listed instrument.“We are still of the view that for the REIT market to pick, a supportive framework needs to be put in place to increase investor appetite in the REIT market,” the firm said.
Read: High taxation, multiple land laws curb growth of real estate investment trustsAccording to a regional property developer Saif Real Estate, investments from Kenyans in the diaspora could boost the local housing market in 2022.
Kenya’s real estate market is primarily a rental market due to unaffordability of home ownership. It is estimated that only 20 percent of Kenyans living in urban areas own their homes.
© Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).
Herbert Street, Waipukurau
The
premises housing one of Hawke’s Bay’s oldest law firms,
other professionals and the world’s biggest submarine
sandwich franchise have been placed on the market for
sale.
The 2,126-square metre site includes a
1,350-square metre industrial-styled office building and is
located at No. 9 Herbert Street in the centre of the Central
Hawke’s Bay township of Waipukurau.
The original
industrial building was converted into an architecturally
designed law office, utilising the design nous of renowned
architects, KebbellDaish from Wellington. The result is an
impressive professional space with a strong underlying sense
of the district’s rural backbone.
KebbellDaish
describe the project on their website as an “idea farm”
which remains an appropriate description of the property’s
current mix of professional tenants who all have strong
roots in the rural community.
The renovation involved
an extensive upgrade of the exterior building envelope and
the construction of pod type offices within the large open
plan space. The extensive use of clear finished timber and
sound control systems in each individual office space
provides an effective and attractive aesthetic. The
macrocarpa flooring, stepped trellis, and baffles all nod to
the rural theme.
The main tenant is DAC Legal which
has been part of Hawke’s Bay’s business community since
1907 when a legal practice was formed by solicitor W C
Hewitt.
Also within the building is convenience food
retailer Subway, which is the world’s largest submarine
sandwich chain with more than 44,000 locations around the
globe – including 246 sites in New Zealand.
A
further tenant is project management consultancy firm
ProjectHaus who work alongside both central and local
government on land management and other projects.
A
branch of The Surveying Company HB is also located in the
building, and is a sub tenant of DAC Legal. The Surveying
Company have successfully completed thousands of land
surveys, subdivisions, and surveying-related activities in
New Zealand.
Rounding out the tenancy schedule within
the building is farming IT consultancy Cloud Farmer who
provides digital solutions for day-to-day farm
recording.
The land and building is being marketed for
sale by negotiation through Bayleys Napier. Salesperson
Kerry Geange said the property offered a true ‘split
risk’ investment opportunity with the five tenants
operating in various industries.
The land is zoned
Business 1 – Inner Commercial under the Central Hawke’s
Bay District Council Plan. The four lead tenancies generate
net annual income of $159,736 plus GST, and
encompass:
- Law practice DAC Legal on a lease
running through to 2024 with two further five-year rights of
renewal. generating annual net rental of $101,250 plus GST,
with rent reviews every five-years - Convenience food
outlet Subway on a lease running through to 2026 with two
further six-year rights of renewal, generating annual net
rental of $30,100 plus GST, with rent reviews every
two-years - Project management consultancy ProjectHaus
on a lease running through to 2023 with two further two-year
rights of renewal, generating annual net rental of $18,386
plus GST, with rent reviews every two-years - Land
surveyors The Surveying Company HB on a sub-lease to DAC
Legal
and
- Farm management IT firm
Cloud Farmer on a lease running through to 2024, generating
annual net rental of $10,000 plus GST.
The
property is located on a high-profile corner in
Waipukurau’s central business district in close proximity
to the town’s major retailers and service providers.
Herbert Street also comprises part of State Highway 2 which
runs through Waipukurau’s town centre.
The building
is serviced by some 30 car parks for staff and visitors and
it’s zoning underpins intensive commercial activities in
Waipukurau.
The sawtooth design of the building has
been highlighted as a feature allowing for high stud
ceilings and an expanse of natural lighting through the
clever use of part of the sawtooth angled roofline.
A
reconfiguration of some of the front offices and workspaces
has created separate modern work environments comprising a
mix of polished concrete, richly-grained wooden flooring,
closed and open-plan spaces. A feature has been made of both
the trellised steel beams and the original wooden beams
which span the overhead space that is lined with acoustic
dampening material.
Floor to ceiling hush glass runs
along the northern side of the building capturing all-day
sun in the cooler months and the integration of the northern
sawtooth overhang provides protection from the strong HB sun
during the summer months.
Meanwhile, Subway’s
footprint within the building is a replicative foodservice
format and is one of the company’s biggest sites in New
Zealand. The Subway premises include a dining floor,
public-facing food preparation benching, and walk-in chiller
storage units and staff amenities housed in the rear portion
of the premises.
With a population of 4,580 people,
Waipukurau is the largest town in Central Hawke’s Bay and
is only 6km from neighbouring Waipawa. State Highway 2 and
the rail line pass through the town which has a strong rural
support/service industry.
The Central Hawkes’ Bay
District Council identifies Waipukurau as an area of current
and projected growth in line with the district’s
unprecedented rate of growth in the past few years. The
Council forecasts the construction of 1,449 new houses and a
population exceeding 18,000 in Central Hawke’s Bay by
2031.
Click here
for more information on this
listing.
New Zealand
Bayleys is New Zealand’s largest full-service real estate company. We offer expertise in the marketing and sale of a wide range of property, including residential real estate, farms and lifestyle blocks, and commercial and industrial property. This includes tourism and business sales such as hotels and motels. We also cover the real estate markets in Fiji and other Pacific Islands.
Bayleys also provides a complete property and facilities service including property management and valuations teams focused on achieving both Owner and Tenant satisfaction.
No other real estate company can match our breadth of coverage across all market sectors throughout New Zealand.
Renting an apartment in New York City this summer? Say hello to sky-high prices and a fight to the finish.
Amid the heat and the occasional rain, there’s a mad scramble to rent affordable apartments in Gotham, which has been undersupplied for many years. Real estate agents describe the mayhem when it comes to prices.
“It’s nuts,” Jessica Peters, a real estate agent with Douglas Elliman, told MarketWatch. “We can’t even keep up anymore. We’re, like, let’s just put up this crazy number, and we’re getting it.”
Offices in the city are trying to woo more employees back: The city is not near full capacity yet — foot traffic to office buildings in NYC is still down 40.6% compared to pre-pandemic levels. But some workers are coming back, restaurants, movie theaters and Broadway are back, and college students are preparing to start school.
Consequently, the median monthly rent is up $725 in June on the year and $59 on the previous month, according to Zillow. The median monthly rent in NYC is $3,300, 53% higher than the national median of $2,155.
“‘A lot of renters will be in for a rude awakening.’”
Peters said that the reality was far worse on the ground. “I just rented something … in Williamsburg. It’s a great two-bedroom ground floor unit, with a big backyard,” she said. “We were asking $6,500. We got $7,000.”
Peters, who specializes in the Brooklyn area, said that while rental prices may be fluctuating a little, the reality is clear for someone looking to be in the city.
“If you’re coming back after not renting in either Brooklyn or Manhattan in the last ten years, a lot of renters will be in for a rude awakening,” Peters added.
(Reminder: Realtors and real estate agent make money on a commission basis, meaning the hotter the market, the higher their earnings.)
That said, the rental market in New York is reflecting a broader intensification of the inventory pressures, which is leading to bidding wars among renters across the country.
But in New York, one of the most expensive cities in the U.S., even some tenants in rent-stabilized apartments cannot catch a break. The city’s Rent Guidelines Board has signed off on hikes as high as 3.25% for new one-year leases, and 5% for two-year leases.
One of Gartenberg’s open housing listings in the Two Bridges area of Lower Manhattan.
Screenshot from Streeteasy.com
Mihal Gartenberg, a real estate agent with Coldwell Banker Warburg, said the market’s wrath was normal; it was just operating on a demand-and-supply basis.
There are people who are simply willing to pay more, he said. “It’s getting to the point where we’re not the ones deciding what these are going for,” Gartenberg added. “This is a true market enterprise.”
Technology was aiding some renters in their search for a home.
A two-bedroom luxury apartment she put on the market for rent two months ago in the Lincoln Square area attracted people streaming in during a two-hour open house in ten-minute increments, on top of prospective renters who joined on FaceTime
AAPL,
“We priced it in my opinion… quite high,” Gartenberg said, at $7,800, “but we ended up taking even more. The person who ended up taking the apartment offered $400 more… we had an offer of $8,200, and they also offered to pay the broker fee, which is an additional month.”
“‘I feel very uncomfortable with this idea that the first person to see a listing is the first one to get it.’”
Over this past weekend, she had open houses for two apartments in the Two Bridges area in lower Manhattan.
“I’m only going to be showing it at the open house. I like to have a level playing field,” Gartenberg said ahead of the event. “I feel very uncomfortable with this idea that the first person to see a listing is the first one to get it.”
Buying a home was worth considering, the real estate agents said, given how intense the rental market has become.
Peters said many renters are attempting to become homeowners because rents have risen so dramatically. “People are starting to reevaluate whether or not they should just purchase at this point,” she said.
“Why would I want to spend $10,000 a month on a rental if I qualify for a purchase? It might not be exactly what they wanted, it might be slightly smaller, but it’s still going to be better than spending $120,000 a year in rent,” she added.
“Do not go see things at your price point,” Gartenberg said. “Because where the market is today, is going above your price point.”
(PHOTO: Getty Images)
But be prepared for bidding wars when buying for a home, Gartenberg warned. She put a newly renovated apartment in Hudson Heights on the market, which is selling “well above ask,” she said, so much that “it made me scared.” The sale on the apartment is not closed yet so she said she was not able to discuss how far above asking the bidder went.
Gartenberg priced her Two Bridges apartments at $3,550 for a two-bedroom unit on the top floor, and at $3,050 for a one-bedroom unit.
On Saturday, her open houses were full. Everything went above the ask. “We had so much interest, we were able to divert offers to a not-yet-listed apartment and rent that, too,” Gartenberg said in a follow-up email.
Half of the offers that came in were from people who had seen the apartment via FaceTime, or from a video she had sent them.
Gartenberg offered rental tips for the summer.
Get your paperwork in order, such as your proof of income, photo ID, 1040 tax form, bank statements, and other financial documents. Also, get your job to write a letter to say you’re in good standing, Gartenberg said.
Given the number of rentals going for above asking, be prepared to look below your price point, she added. If you know which building you want to live in, get in touch with the landlord’s agent, she said, and find out what’s coming to market.
Hunting for a rental in New York and want to share your thoughts? Write to: aarthi@marketwatch.com
Two mixed-use towers could be coming near the convention center, a permit with the city of Austin shows.
The buildings would go up on a half-block at East Third Street and San Jacinto Boulevard, adding to the downtown tower boom that’s seen a slew of developments offering office, residential and retail space.
The project, which would occupy a 0.81-acre site, is known as Block 32 in the site plan filing.
The towers would go up on a site that currently has businesses like Vince Young Steakhouse, Thomas Printworks and The Sunset Room event space, which would face demolition if tower plans progress.
The building housing the steakhouse and printshop was built in 1912 during the industrial boom ushered in by Austin’s railroad system, according to The Austin Monitor. It was also the site where reality show, “The Real World: Austin” was filmed in 2005. Vince Young Steakhouse opened on the site in 2010.
In January, the Planning Commission rejected historic zoning for the warehouse that the steakhouse is at after Austin’s Historic Landmark Commission said it should be preserved because of its architectural merit, historic association and community value.
But the property owner had expressed hopes for demolishing the building to build a tower on the site; city council members weren’t certain that preserving the building would be a benefit for the city.
While the developer behind the buildings isn’t clear yet, the permit was filed by engineering and design consultancy Kimley-Horn.
A rare 16-acre estate in London’s Hadley Green once owned by the family of poet laureate Lord Alfred Tennyson came on the market last week asking £17.5 million (US$21.48 million).
“With a history that combines Queen Elizabeth I, the Tennyson family of poet laureate Lord Tennyson and captains of industry, Hadley House in Hadley Green is the finest country house to be listed for sale within Greater London for a number of years,” said a statement from Beauchamp Estates managing director Jeremy Gee, who shares the listing with Nick Staton of Statons Estate Agents.
More: Historic London Dock House Overlooking the River Thames Lists for £4.75 Million
“The fully modernized house and manicured gardens are beautifully presented and the estate offers all the amenities such as swimming pool, gymnasium, tennis court, boating lake, and games [and] media room that buyers expect from a country house of this stature and quality,” Mr. Gee continued.
The property overlooks the historic Hadley Green, a nature reserve, and also features sweeping views of London from the grounds as well as from the main home, according to marketing materials.
The 17,260-square-foot nine-bedroom Georgian manor house was built circa 1760, and has permissions in place to add an orangery extension that would bring the total square footage up to 19,417. Prior to the construction of the current home, the original Hadley House was built on the site in the 1500s, and was visited in 1558 by Queen Elizabeth I during a journey to London.
More: Private Scottish Island With 17th Century Mansion and Organic Farm Lists for £1.75 Million
The stately home includes five reception rooms, three entrance halls, and an indoor swimming pool with a retractable floor and arched floor-to-ceiling windows with glass doors opening onto the property’s grounds, per listing photos. A wood-paneled library features bay windows overlooking the grounds, as does an office with large windows and a fireplace.
One of the property’s numerous entertaining spaces is a living room with floor-to-ceiling windows on three sides and doors opening out onto the estate’s manicured grounds, per listing photos. A primary suite features a fireplace as well as large windows with extensive views, and an en-suite bathroom with dual sinks and a soaking tub.
The home also boasts a gym, a games and media room, a family kitchen, an estate office, a staff preparation kitchen and staff quarters, per the listing.
Entered through wrought iron gates, the estate’s landscaped grounds include classic English gardens and walking paths, an Italian-style Pergola, a boating lake, a walled garden, a “hedge enclosed flower garden,” and a tennis court. A stone-paved terrace is located at the back of the house.
The property was purchased in 1859 by Louis Charles Tennyson d’Eyncourt, a cousin of poet laureate Lord Alfred Tennyson. Hadley House was also owned from 1926 to 1982 by industrialist Archibald William Stoney, founder of Palmer & Harvey.
The current owners, author, economics lecturer and businessman Charles Jonscher and his wife Renata, a professional singer, purchased the property in 1999, and are selling in order to downsize to a smaller London townhouse and to purchase an additional country house, according to representatives. Mr. and Ms. Jonscher were not immediately available for comment, and the home’s most recent sale price could not be determined.
Written agreements enforce collection of a fee
A broker’s assurance they will earn their fee for services rendered is required by the statute of frauds to be both:
- in writing; and
- signed by the client.
Once entered into, the written contract entitles the broker to enforce collection of the fee from the client, whether or not the broker performs as agreed.
Formal documentation of an obligation to pay a fee — a written agreement containing a fee provision and signed by the client — is the legislatively enacted and judicially mandated requisite to the right to enforce collection of a broker fee from a client who has agreed to pay it.
The written agreement contains the client’s promise to pay a fee. Critically, the client’s mere oral promise to pay a fee does not entitle the broker to enforce collection of the fee due from the client.
Thus, whenever a client employs a broker to act as their agent, the broker’s best form of fee protection is a written and signed contract — typically in the form of a listing agreement. [See RPI Form 102 and 103]
Although a seller or buyer’s exclusive listing agreement is the most frequently used contract among sellers and buyers of real estate, brokers are also frequently employed to act as leasing agents for landlords or tenants.
A leasing agent is a broker who markets the availability of space to rent and locates and negotiates the terms of a lease with suitable tenants.
Sellers and landlords, buyers and tenants
The seller’s listing agreement employs the broker as a property owner’s sole agent for a fixed period of time to list the property for sale, locate a buyer and sell the property. [See RPI Form 102]
In a similar fashion, the exclusive authorization to lease property employs the leasing agent as a landlord’s sole agent for a fixed period of time to solicit prospective tenants and negotiate a lease of a specific property. [See RPI Form 110]
Essentially, the exclusive authorization to lease property is the same side of the transactional coin as a seller’s exclusive listing agreement. The major differences are that the property is for lease, rather than for sale, and the client represented by the broker is the landlord, rather than the seller.
On the other hand, a buyer’s listing agreement employs a broker as a prospective buyer’s sole agent for a fixed period of time to prepare an offer to render services on behalf of the buyer to locate and acquire property. [See RPI Form 103]
Similarly, the exclusive authorization to locate space employs the leasing agent as a tenant’s sole agent for a fixed period of time to locate property and negotiate terms and conditions for its rental or lease. [See RPI Form 111]
The exclusive authorization to locate space is comparable to the buyer’s exclusive right-to-buy agreement, except the property sought is for rent, rather than for sale, and the client is a tenant, rather than a buyer.
Despite their differences from exclusive right-to-sell and right-to-buy listings, the exclusive authorizations to lease property and locate space are employment agreements. When they are in writing and signed by the client, the written agreements entitle the broker to receive a fee when the client’s objectives are fulfilled — in this case, the renting or lease of property.
The benefits of exclusive authorizations
Both the client and the leasing agent benefit under the exclusive authorization to lease property. Likewise, all participants benefit under the exclusive authorization to locate space.
The leasing agent benefits, since their efforts will be paid for, when:
- anyone procures a tenant for the identified space during the listing period, in the case of the exclusive authorization to lease [See RPI Form 110]; and
- the tenant enters into a lease agreement for space similar to the space sought under the exclusive authorization to locate space. [See RPI Form 111]
The client (landlord or tenant) benefit under these arrangements, since:
- the employment commits the leasing agent to fulfill the client’s objectives diligently, consistently and conscientiously; and
- the client and leasing agent work together to accomplish a single objective.
Analyzing the exclusive authorization to lease
A written agreement signed by the client is the only way a broker protects their right to compensation for services. More importantly, a written agreement memorializes the leasing agent’s obligation to work conscientiously and continuously to meet the client’s objectives, whether representing a tenant or a landlord. [See RPI e-book Real Estate Property Management, Chapter 12]
A leasing agent uses the Exclusive Authorization to Lease Property published by Realty Publications, Inc. (RPI) when employed by a landlord as their sole agent to solicit prospective tenants and negotiate a lease of a specific property for a fixed period of time. [See RPI Form 110]
The sections of the Exclusive Authorization to Lease Property include:
- Retainer period: The commencement and termination dates of the employment and a statement ensuring the broker will use diligence in the performance of the agreement. [See RPI Form 110 §1]
- Addendums: A checklist of possible addendums to attach to the agreement, including a title report or title policy, work authorization, occupant’s operating expense profile, criminal activity and security disclosure statement and lead-based paint disclosure for all one-to-four residence units constructed before 1978. [See RPI Form 110 §2]
- Brokerage fee: the broker enters the amount the client is to pay as compensation for services rendered or attaches a fee schedule. [See RPI Form 113; See RPI Form 110 §3]
- General provisions: Broker and landlord authorizations are listed and agreed to, when signed by the client. [See RPI Form 110 §4]
- Real estate: The type, address, vesting and encumbrances of record on the specific property are entered. [See RPI Form 110 §5]
- Personal property: References to any personal property included in the property for lease are entered. [See RPI Form 110 §6]
- Condition of title: The landlord’s interest in the property is to be checked (fee simple, leasehold or other). The landlord agrees there are no unsatisfied judgments or actions pending against them, no condemnation/eminent domain proceedings or other actions against the property and no unrecorded deeds or encumbrances against the property. [See RPI Form 110 §7]
- Lease terms: The broker enters the period of the lease term sought, the available date of occupancy, the initial rent amount, deposit amount, late charges and utilities, insurance payments the tenant is required to pay and the responsibilities the landlord is to maintain. A blank space is also included for the broker to enter any other lease terms that may apply. [See RPI Form 110 §8]
- Signatures and identification of the parties: The parties enter their information and sign to agree to the employment on the terms stated in the form. [See RPI Form 110]
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Form of the week: Exclusive Authorization to Lease Property and Schedule of Fees — Forms 110 and 113
Analyzing the exclusive authorization to locate space
A broker needs to enter into an employment agreement with a tenant before extensively analyzing the tenant’s needs for space the broker intends to locate. As a matter of best practices, the employment agreement is entered into and signed prior to locating space or exposing the tenant to available space not listed with the broker. [See RPI e-book Real Estate Property Management, Chapter 13]
A leasing agent uses the Exclusive Authorization to Locate Space published by RPI when employed by a tenant as their sole agent to locate property and negotiate terms and conditions for its rental or lease for a fixed period of time. [See RPI Form 111]
The sections of the Exclusive Authorization to Locate Space include:
- Retainer period: The commencement and termination dates of the employment is entered. [See RPI Form 111 §1]
- Broker’s obligations: The broker agrees to use diligence in the performance of the agreement and when the tenant’s intended lease period exceeds one year, the tenant acknowledges their receipt of the Agency Law Disclosure. [See RPI Form 550-2; See RPI Form 111 §2]
- General provisions: General information for the tenant is listed. [See RPI Form 111 §3]
- Brokerage fee: The broker enters or attaches a fee schedule to set the amount the broker will receive from the tenant for services rendered. [See RPI Form 111 §4]
- Type of space sought: The broker enters the general description, location, size, rental amount and rental term of the tenant’s desired property. [See RPI Form 111]
- Signatures and identification of the parties: The parties enter their information and sign to agree to the employment on the terms stated in the form. [See RPI Form 111]
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Want to learn more about assisting landlords and tenants? Click the image below to download the RPI book cited in this article.
The average rental rate for luxury homes rose nearly 12% annually in the first quarter across 10 major global cities, according to a report Monday from Knight Frank.
New York City and London saw the largest jumps in the cost of renting a high-end home, up 38.5% and 26.4%, respectively, in the first three months of the year compared to the same time in 2021, the data showed. Much of that growth was due to a “return to pre-Covid levels” of rental rates, Kate Everett-Allen, head of international residential research at Knight Frank, wrote in the agency’s first Prime Global Rental Index.
“This first set of results confirm the extent to which top-tier cities are seeing demand return and stock dwindle as workers, along with international students and corporate tenants return to the prime end of the market,” she wrote. “Key to this trend has been the lifting of Covid restrictions and a lack of supply, in part borne out by the sales boom which motivated some landlords to sell, not rent, during the pandemic.”
Toronto had the third highest year-over-year rental growth in the first quarter, 17.2%, followed by Singapore, 10.8%, the report said. Geneva ranked last, with rents up 1.1%.
“The surge in rents reflects a reversal of large falls in 2020, which helped attract tenants back to the city,” Ms. Everett-Allen continued. “But with rents now reaching pre-pandemic levels, economic growth stuttering and the labor market weakening, we expect prime rental growth to cool rapidly over the remainder of 2022.”
However, she also pointed out that rents in Toronto may be an exception.
“Here, rental listings are down 23% in the year to March 2022 and Canada’s ban on foreign buyers may push demand higher as those relocating from overseas are forced to rent, not buy,” she wrote.
Houses selling for hundreds of thousands over asking price, offers that include rare bottles of bourbon and luxury vacations, and deals made sight unseen with no inspection. Richmond’s real estate rumors are true.
“Five years ago, I would have called these offers crazy, but now they’re standard,” says Graham Rashkind, managing broker and owner of Rashkind Saunders & Co. “We had a house in Glen Allen that had literally caught fire, sat open to the elements for more than a year, and still received 10 cash offers and $75,000 over the asking price. It blew our minds.”
Low inventory, low interest rates, a growing population and pent-up buyer demand have created an extreme seller’s market. Intense buyer competition and a shorter time on the market are contributing to the frenzy.
According to the Richmond Association of Realtors, homes are selling about twice as fast as they have in the past. The average number of days on the market for homes in Central Virginia was just 18 in 2021 compared to 42 in 2017.
“Typically we’re seeing a home hit the market on a Thursday, all offers have to be in by Sunday and are answered by Monday,” Rashkind says. “That’s an unfortunate cycle. Out-of-towners can’t get here, and if you’re looking at five homes that weekend, you have to choose just one to make an offer. You’re rushed to make a decision on a major financial investment.”
Rashkind says he booked the last showing of a Stratford Hills home for a client at 7 p.m., and offers were due by 8 p.m.
“When we pulled up, it looked like a scene from ‘The Walking Dead,’ ” he recalls. “People were roaming the streets outside the home writing in notepads and taking photos, just trying to get as much information as they could before the deadline. The house ended up getting 61 offers — the most I’ve competed with — and unfortunately, my client didn’t get the house.”
On the flip side, one of Rashkind’s listings in Westover Hills just had 96 showings and went for 45% over asking price. The sellers were able to secure a nice nest egg. They’ll spend time at their river house while renting an apartment in town to be close to grandchildren.
Offers that are over asking price make it harder for younger and less-wealthy buyers to compete. Ernie Dettbarn, associate broker with Shaheen, Ruth, Martin & Fonville, says the market is especially frustrating for first-time homebuyers. “They’re having a difficult time competing not only against one another but with investors, as well as buyers seeking to downsize. In addition to a low inventory of homes, Richmond is seeing historically high rental rates and a rental shortage.”
In a seller’s market, it’s not just about the highest price, but also about making the seller feel comfortable about the deal going through.
Dettbarn says many buyers are making cash offers to eliminate the financial contingency. A buyer may still opt to finance at closing, but they must prove they have the assets to back their offer.
“I advise buyers to have their finances in order if they plan to purchase with a mortgage loan and explore the possibility of getting assistance from a relative so they can make a cash offer,” Dettbarn says. “But no matter what, buyers should always stay within their price point.”
Home prices have been a moving target, making budgeting difficult. And this isn’t just a Richmond problem. According to the National Association of Realtors, home prices were up almost 15% from 2020 to 2021, increasing the median sales price to $375,300. Central Virginia numbers aren’t far off. Prices rose 12.5% in the same period to a median sales price of $315,000. In addition, the average home sold in Central Virginia last year went for 102% over asking price.
A broker associate with Compass, Jenny Maraghy has been in real estate for 30 years and has never seen anything like it.
“Prices are getting so high, we’re starting to see homes not appraise,” Maraghy warns. “If an offer is submitted for $1 million, but [the house] appraises for $850,000, the buyer has to make up the difference.”
Other than making cash offers, buyers are accommodating sellers as much as possible. Some Richmond buyers are tempting sellers with lavish gifts on top of an already strong offer. “But at the end of the day, it’s really about the net value of the offer at closing,” Rashkind says.
Many buyers are closing quickly, then allowing the sellers to remain in the home rent-free until they’re ready to move out. Though not widely advised, many buyers are also waiving inspections.
“The hard truth is that buyers must be willing to put some work into homes they purchase,” Dettbarn says. “That has always been true of homeownership, but it’s especially true now. In today’s market, sellers simply don’t have to present their properties in perfect condition.”
Real estate has always been about location, but buyers may have to be flexible and broaden their search, even if their hearts are set on desirable areas like Richmond’s Museum District, neighborhoods around Libbie and Grove avenues, or popular subdivisions in Glen Allen.
“Some buyers simply can’t afford the areas where they want to live, and they face a tough decision,” Dettbarn says.
In April, the interest rate exceeded 5% for the first time in more than 10 years, according to Freddie Mac. Compared to 3% interest rates last year, this means a $400,000 home now costs $400 more a month to finance.
“I wish I had a crystal ball to see when things might level out,” Maraghy says. “I’ve never seen a time when buyers and sellers needed an agent more. There are just so many pieces that need to be discussed. Being a buyer right now takes fortitude.”
Rashkind believes this kind of market won’t go on forever. While he’s happy for his clients selling a house, he feels for those struggling to buy. “I really prefer a more balanced market,” he says. “When buyers and sellers can negotiate, both sides can win.”
Recently Sold
Photos courtesy CVRMLS
I Survived Richmond’s Real Estate Hellscape
Take an evening walk down Floyd Avenue in the Fan, and you’re likely to see me lounging on my front porch, a glass of wine in hand. I may look peaceful, but the truth is, I’m shellshocked from Richmond’s wild real estate market — and it’s going to take some time to recover.
My husband and I have been buying, renovating and selling homes since we moved to Richmond in 2014. Yet when we felt the familiar urge to move after three years in our Far West End home, our instincts screamed at us to wait. But we’d always wanted to live in the Fan, and as we watched prices rise, we knew we had to pounce before we were priced out.
Luckily, we had an ace up our sleeves. Our most recent renovation project was a home in Cape Charles, which we were able to sell, off-market, for nearly four times what we paid. That meant we had some ammunition — the ability to make a solid cash offer.
After selling the Cape Charles house, we jumped into the early spring market and quickly learned we weren’t the only cash buyers out there. Our real estate agent informed us that there was a big contingent relocating from cities like D.C., Philadelphia and New York — buyers who thought an $800,000 town house was a bargain. Time and time again, we found ourselves beat out by buyers with more aggressive offers.
And then we found “the one” — the house that ticked every single box. We decided to offer everything we had, despite the fact that it was significantly more than the asking price.
We weren’t surprised when we were outbid once again — by someone willing to go more than $200,000 over the asking price. What did surprise us? The sellers chose our offer instead, based on a heartfelt letter we’d submitted with it.
After settling into our Fan home, we put our suburban house on the market — and found ourselves with a newfound sense of compassion for the brave, desperate buyers. —Erica Jackson Curran
Full House
After months of playing the real estate market, a big gamble pays off
If you’ve ever bought a house, you know that feeling of deliberating numbers, making your offer and then waiting. At any minute, the phone will ring, delivering a yes, a no or a counteroffer. Some people find that thrilling, but I don’t have the stomach for high-stakes poker, and that’s exactly what today’s real estate market feels like.
Our family moved from Louisiana to Richmond last year. We found a rental house near Tuckahoe Elementary School and assumed we’d buy a home nearby before our six-month lease was up. We quickly realized that finding a rental had been pure luck, and that buying a house had even worse odds. Weeks went by with nothing on the market, and when a house finally popped up, it was gone in a day.
Over several months, we looked at a dozen houses, each with its own imperfections and an inflated price. I started to feel desperate enough to take anything, convincing myself that a funky ’50s layout would only add character.
For one showing, we were up against 50 prospective buyers, and we each got a 30-minute appointment to assess our largest investment. We submitted an offer, thinking it was a sure bet, but we fell short. A month later, the same thing happened: a great house, multiple offers and another losing hand.
One Friday, my son had a minor medical procedure. My husband was scrolling through his phone at the hospital when he saw a promising listing flagged “Coming Soon.” He wanted to make an offer — from the waiting room. We called our agent with our conditions, putting all our cards on the table. Later that night, the sellers accepted. We had found a house! We just hadn’t actually seen it yet.
Today, we’re settled in our new home, in a neighborhood where our boys can bike to school and to 7-Eleven. We’re happy to be out of the game, and we feel good about our investment. Now if only we had stock in Slurpees … —Laura Anders Lee
The race upwards on the German housing market continues: new figures show that house prices increased once again in the first quarter of 2022. However, experts are seeing signs that the price rises could soon run out of momentum.
House prices rise more than 10 percent for fourth consecutive quarter
The cost of buying a house in Germany rose once again at the beginning of the year. Figures from the Federal Statistical Office (Destatis) show that the average house price between January and March 2022, excluding taxes and other fees, rose by an average of 12 percent compared to the same period of the previous year.
“This means that the rate of increase in the house price index was over 10 percent for the fourth time in a row,” the statisticians wrote. At the end of 2021, the year-on-year house price increase was 12,2 percent compared to the end of 2020, following previous annual rises of 12 percent and 10,9 percent.
Price increases gradually slowing down in Germany
However, there are some signs that a downturn could be on the horizon. Comparing quarter-on-quarter prices, Destatis found that prices for apartments and houses in Germany only rose by around 0,8 percent at the beginning of 2022, down from 3,1 percent in the fourth quarter of 2021 and 4,1 percent in the third quarter. “This indicates a slight weakening of the momentum,” Destatis concluded.
The recent sharp rise in interest rates is currently making mortgages more expensive and dampening demand for real estate. According to the online portal Immoscout24, demand for housing fell by 17 percent in the first quarter of 2022, compared to the same period in 2021. Real estate agents are noticing that housing listings are remaining live for longer, and it is becoming harder to find buyers.
Experts believe house prices could soon fall due to rising interest rates
“These developments could have a dampening effect on price developments in the medium term,” said ImmoScout24 Managing Director Gesa Crockford. The Landesbank LBBW recently predicted that house prices would fall in Germany if interest rates continue to rise while the economy stagnates. Their experts say we could be looking at price drops of as much as 20 to 25 percent.
Nonetheless, demand on the housing market currently remains well above the level recorded at the end of 2019, prior to the coronavirus crisis.
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