Flood Insurance, the Mortgage Market, HOA behavior, Mortgage Interest Tax Deduction , Appraisal Reform to a sales tax on professional services are items being discussed in Washington and Austin
We all know that the housing market is still not doing great, but we may obtain a few clues on how easy a transaction can be by watching the progress on a few laws.For me, school funding and reform is a prime issue that homeowners should watch. Have you ever been on a website looking for a home to purchase? You will notice that along with a list of homes, you will have neighborhood information listed. This includes data about the local schools. There is a good reason for this: many home buyers consider the quality of the local schools when buying a home. I even had clients who wanted a certain neighborhood, because of the school. Yet for many in the real estate community, this does not appear to be a concern. Here are some items that are coming up:
National Flood Insurance Program(Washington)- when you live in a flood plain, you need flood insurance. For some reason, Congress has only issued short term extensions to this program so that they can issue flood insurance policies. At issue is a debate over fiscal reforms to the program. The problem for buyers and sellers is that if the program is allowed to expire, real estate transactions could be delayed or canceled, which has happened before. Hopefully, time has come to resolve the debates to have this program on a sound footing for some time to come.
The mortgage market including Fannie Mae and Freddie Mac (Washington)- There are some who want to end these entities right away. That would kill the real estate market, since most mortgages that are currently produced come from them (somewhere in the area of 80% to 90%). Blaming them alone for the past housing crisis is incorrect, and demanding their immediate exit id irresponsible in my mind. Obviously, the government needs to pull away from being such a dominant force, and private industry needs to step up to meeting this need. There are indicators that these government sponsored enterprises are beginning a process of limiting their role in this market. For homeowners looking to redo their loan, or for buyers, this will have one noticeable effect, interest rates on mortgages will go up.
HOA reform (Austin)- I think that an association of homeowners trying to improve their community sounds like a great effort, yet my experience with Homeowner Associations and the like has not been positive. A real problem is that these entities can foreclose on homeowners for non-payment of fees, which is supposed to be against the Texas Constitution. Hopefully, the authority of HOAs will be curtailed.
Mortgage Interest and Real Estate Tax Deduction (Washington)- there is a lot of rhetoric about ridding our nation of unfunded stimulus packages. How these will harm our grandchildren. However, many of those leading a charge against stimulus measures do not want to see this unfunded stimulus to go. The idea behind this stimulus was to encourage citizens to become homeowners by giving them a tax break. Encouraging homeownership was great for the economy, so this made sense. A recent survey shows that for some Americans, the dream of homeownership no longer exists, so why should an unfunded tax break continue? Maybe because members of Congress own homes and their constituents own homes? This deduction will continue to be on the books, but it may not be as robust as it once was.
Appraisal Reform (Austin)- appraisals effect our mortgages. Can we get the mortgage we need, or how much of loan can we obtain are questions effected by appraisals. Since this is not my end of the business, I have not looked into all of the details here. I have spent more time looking at the national appraisal concerns (a big item now is trying to understand “customary and reasonable” fees). Yet each state regulates how a transaction takes place, so I should brush up on this one. For sellers and buyers, you may want to know a bit about this one too, so I mentioned it, but I apologize for not giving more specifics.
Sales Tax on professional services (Austin)- Did you think that a real estate transaction was expensive? Well, you may be paying more. The Texas legislature is considering the idea of a sales tax on professional services as a way to increase revenue. What does that mean for the real estate transaction? As a home inspector, I provide a professional service, so I will need to include that tax. Your real estate agent will also have to apply a tax based upon their service. You hire many professional services all along the road to homeownership, so be prepared to pay more taxes. In an atmosphere were increasing taxes is unpopular, maybe we would not see this one go through, but the real estate community is concerned with this one.
Alright, this is all too brief, but I hope that your take the time to investigate these situations further. I feel that a housing recovery may be stalled, and we may see more problems with real estate transactions, so we will need patience when buying or selling a home.