Supreme Court rules on disclosure of murder-suicide

On July 21, the Pennsylvania Supreme Court unanimously decided that a murder-suicide in a property is not a material defect that a seller has to disclose to a buyer.

The history of Milliken v. Jacono is well-known to Realtors®. A highly-publicized murder-suicide occurred on the property, and the estate sold the property to the Jaconos (yes, the estate did disclose the murder-suicide). Seven months later, the Jaconos were relocated. When they listed the property for sale, they spoke with their listing agent, who checked with both the PAR Legal Hotline and the State Real Estate Commission. In both cases, the Jaconos were told that the murder-suicide was not a condition “of” the property and disclosure was not required. The listing agent still recommended disclosing the murder-suicide, but the Jaconos declined the advice.

Milliken was moving from California to Pennsylvania. She found this house via the Internet, and took the necessary steps to buy it. Prior to settlement, Milliken reviewed the Sellers’ Disclosure Statement, received (but did not read) the homeowners’ association documents, and received and reviewed the title report that disclosed the Jaconos’ bought the property from an estate. Milliken did not undertake any additional investigation about the history of the property. After she moved in to the property, Milliken experienced a “cherry pie” moment, learning about the murder-suicide from a neighbor.

Milliken sued the Jaconos, the listing agent and the buyer’s agent claiming fraudulent misrepresentation, negligent misrepresentation, violations of the consumer protection laws, and violations of the Sellers’ Disclosure Law. The trial court dismissed the law suit against the Jaconos and the listing agent, finding that murder-suicide was not a material defect that a seller was required to disclose under either the common law or the Sellers’ Disclosure Law. Milliken appealed, and while a panel of the Superior Court initially agreed with Milliken, upon reconsideration en banc, the Superior Court held that there was no misrepresentation of a material fact that would support claims for fraudulent or negligent misrepresentation. Since there was no duty to disclose, there was no violation of either the Sellers’ Disclosure Law or the consumer protection laws. Milliken appealed to the Supreme Court, which agreed to hear her appeal only on the issues of fraudulent and negligent misrepresentation, and violations of the consumer protection law. This meant that the Superior Court’s holding that the Sellers’ Disclosure Law did not require a seller to disclose a murder-suicide was the law of the land.

The Supreme Court’s ruling contained several important points. First, the Court commented that using a disclosure form that revealed more information about a property than the law required does not create additional mandatory disclosure requirements. (Yes, the PAR Sellers’ Disclosure Form was the one!) Second, the Court stated that it was “not ready to accept that [a psychological stigma] constitutes a material defect.” The Court observed that requiring quantification of the psychological impact of various traumatizing events would be a “Sisyphean task.”

Third, the Court recognized that psychologically traumatic events do not result in defects to the structure of the house; they do not affect the quality of the real estate. Fourth, the Court noted that it would be nearly impossible to assign a monetary value to psychological stigma.

Lastly, and importantly for buyers’ agents, the murder-suicide was absolutely not a latent event. It was widely publicized in the local media and on the Internet; and was a well-known event within the neighborhood. The doctrine of caveat emptor still survives and places the responsibility on the buyers to ensure the property they are buying meets their needs. In the words of the Pennsylvania Supreme Court, “Purely psychological stigmas are not material defects of property that sellers must disclose to buyers.” It doesn’t get much clearer than that!

By: Brett Woodburn, Esq.

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After 8 years, the real estate market is finally looking normal again

Since 2006, the real estate market has either been severely depressed or white hot. In 2014, it looks to settle down.

FORTUNE -- Real estate investors are likely suffering from financial whiplash after the wild rise and fall of home values over the last 10 years.
The beginning of the last decade saw an unprecedented spike in real estate prices, which culminated in the bursting of the real estate bubble in 2006 and a financial crisis to boot. Then came the crash, and prices fell precipitously, with the Case-Shiller Housing Index losing 33% from its 2006 peak to the 2012 trough. But nearly just as quickly, investors flocked back to real estate as they realized that getting in at the bottom could be a great source of profit. Since the beginning of the housing recovery two years ago, the Case-Shiller index has regularly shown the national real estate market getting more than 10% pricier on a year-over-year basis.

 

This rapid appreciation in prices has caused the inventory of homes on the market to shrink, as prospective sellers are wary of jumping into what looks like a buyers' market. This dynamic can be especially frustrating for first-time homebuyers who face the double threat of banks wary of lending to anybody but the most creditworthy and homeowners wary of selling while prices look to be on their way up.
But new data shows that the rapidly rising home prices we saw in 2013 are expected to slow considerably this year. Historically, home prices tend to appreciate only slightly faster than inflation, and there's reason to believe that the market will settle into this pattern once again.

Last week's Case-Shiller data  measuring January home prices, for instance, showed a third straight month of slight declines in national home prices on a month-over-month basis. While the index still showed that prices rose by double digits compared to last year, the fact that home prices have stopped appreciating on a month-to-month basis signals that valuations will begin leveling off.
Furthermore, data released Monday from real estate valuation firm Clear Capital -- which is more up to date than the Case-Shiller figures -- shows that non-seasonally adjusted real estate prices remained flat nationally during the winter of 2014 and that prices even fell in some regions of the country like the Midwest. The Clear Capital figures aren't seasonally adjusted, so poor winter weather likely depressed activity in some parts of the country, but the data still suggests that the rapid price increases we saw in 2013 won't be a factor in 2014.
The Clear Capital data also indicates that one of the main stories of the real estate recovery -- cash-rich investors buying up single-family homes for rock-bottom prices -- could be coming to an end. According to the Clear Capital report:

Low price tier home sales (homes selling for $95,000 and less) have fueled the recovery over the last two years. This deeply discounted sector attracted enough buyers to drive prices up 31.8% from the bottom of the market in 2011. Over the last quarter, however, low tier home price gains slowed to just 1.2% -- a big difference from 3.7% a year ago. Stabilization, with rates of growth not seen since November 2011, could motivate first time and move-up home buyers to re-engage.

If indeed this rapid price appreciation in the low price tier homes is coming to an end, that could signal the retreat of the investor class from the single-family market and an opportunity for first-time homebuyers relying on mortgage financing to take a larger role in the real estate market going forward.

Finally, there are indications that the market is finally responding to the price increases of the past couple of years by getting more inventory up for sale. This comes from builders ramping up production (new construction has increased nearly 80% over the past five years), and from homeowners and banks realizing that the property they own isn't likely to continue to increase in value at the rapid pace it has the past two years. Trulia Chief economist Jed Kolko has tracked seasonally adjusted housing inventory and measured an 8.4% increase in inventory on that basis in 2013, and non-seasonally adjusted data shows that inventory has continued to increase in 2014, despite the cold winter weather.
In other words, it appears as if supply and demand are meeting each other in the middle after years of strange dynamics dominating the real estate market. Buying or selling a home is not anybody's idea of a fun time, but as 2014 real estate season begins to rev up there might be fewer headaches associated with the market than there have been in many years.

By: Christopher Matthews



CNN Money

Freddie Mac: Doubtful Rates Will Return to Recent Lows

"One thing seems certain: we aren't likely to see average 30-year fixed mortgage rates return to the historic lows experienced in 2012."
- Freddie Mac,  March 24, 2014

There are those that hope that 30-year mortgage interest rates will head back under 4%. Obviously, for any prospective home purchaser that would be great news. However, there is probably a greater chance that interest rates will return to the greater than 6% rate of the last decade before they would return to the less than 3.5% rate of 2012.

"The all-time record low – since Freddie Mac began tracking mortgage rates in 1971 – was 3.31% in November 2012. Conversely, the all-time record high occurred in October of 1981, hitting 18.63%. That's more than four times higher than today's average 30-year fixed rate of 4.32% as of March 20...rates hovering around 4.5% may be high relative to last year, but something to celebrate compared to almost any year since 1971."

 

If you are thinking of buying a home, waiting for a dramatic decrease in mortgage rates might not make sense.

Taken From: Keeping Current Matters

Beware: Deed Scam

If you’ve recently purchased a home, a scam may try to trick you out of more than $80.

Gitte Laasby recently reported on scammers contacting new home buyers with a seemingly legitimate solicitation offering to send a copy of their property deed and other information for $83. Laasby discovered the scam after Graig Goldman, a real estate broker with Re/Max sent in a copy of a solicitation from a company called Record Transfer Services.

At first, the solicitation known as a “Deed Processing Notice” seems legitimate. On the copy we reviewed, the property information is included, along with county information, a compliance date, and a “helpful” tip box offering answers to “Why you need your current Grant Deed and property file.”

The problem is, you don’t need your deed. Those documents are mailed to you free after a sale or transfer. And if you need another copy, you can order one through your county clerk’s office for a few dollars. In some counties you can also order deed copies online. All of which some homeowners may not realize.

“Unfortunately, sitting through a closing is quite baffling if [home buyers have] never done it before,” Goldman said. “They’re preying on people’s ignorance of the home-buyer process.”

As for the other documents, they’re useless. We contacted Record Transfer Services by phone, acting as a homeowner, and spoke with a representative who referred to herself as Sandy. According to Sandy, along with the deed, homeowners will get a “property profile,” which comes with information such as “transfer histories, property lines, county tax amounts, even the number of rooms … basically everything you need to know about your house.”  It’s all information that is either not needed, or already known, by a homeowner.

What Record Transfer Services is doing may not be illegal. A copy of the letter we reviewed included this fine-print disclaimer: “This service to obtain a copy of your grant deed or other record of title is not associated with any governmental agency. You can obtain a copy of your grant deed or other record of title from the county recorder in the county where your property is located in, for up to $83.” The representative we spoke to told us if we included a memo to her with our personal check she’d “personally make sure we deposit the check.”

Laasby reported that the scammers operate under multiple business names, including Property Transfer Services, Record Transfer Services, Conveyance Transfer Services, Record Retrieval Department and National Deed Service.

They also operate with different phone numbers. After reviewing a solicitation from Florida, we called the phone number provided and reached a recording from “Deed Processing” stating that we would receive our documents in seven to 21 days after payment or we could leave a message with our name, address and phone number to receive a call back from a representative.

The scammers also have a wide net. We found references to this deed scam in Wisconsin, Florida, Michigan, Ohio and New York. Homeowners in other states may have received solicitations, but not reported them simply because they didn’t know there was anything to report.

So far it isn’t clear how the scammers are getting homeowners’ information, but property sales and ownership is a matter of public record. Anyone can visit a county office and compile a list of recent homeowners.

Generally, if you receive a solicitation asking for more money after your closing, it isn’t legitimate. But if you aren’t sure or want more information, contact your county clerk’s office or your real estate agent.

And if you need a copy of your deed for any reason, visit your county clerk in person or online. Copies shouldn’t cost more than a few dollars.

                                                                                                                Written By: Angela Colley

 

Home sales: Best year since 2006

Homeowners sold 5 million homes in 2013, a rebound year for the industry that marked the highest level of sales since the housing boom year of 2006.

The report from the National Association of Realtors showed that there were 5.1 million previously owned homes sold in the year, up 9.2% from 2012 and up nearly 20% from 2011.

December sales were up slightly from November, the first month-over-month rise in the reading since July. Mortgage rates have been rising steadily since hitting record lows in May, raising the cost of purchases for home buyers.

The Realtors attributed the full-year gain to rising prices, lower unemployment, a drop in foreclosures and pent-up demand, as well as mortgage rates that are still low by historical standards, even with the steady increases most of the year.

The median price of a home sold in the year was $197,100, up 11.4% from the previous year. Rising prices have reduced the number of homeowners who owe more on their mortgage than their home is worth, helping to bring more buyers into the market. Tight supplies of homes for sale are keeping prices high, as the report showed less than a 5-month supply at the end of the year.


Part of the tight supply is due to the sharp drop in distressed home sales.  Only 14% of the homes sold in December were in foreclosure or were short sales for less than the amount owed on the existing mortgage. A year earlier, nearly a quarter of sales were distressed home sales.


CNN Money

Housing Inventory continues to dip, while Closed Sales Increase

For those of us with little patience, the slowly improving real estate market can be painful.  Most real estate markets swing like a pendulum from a buyer's market to a seller's market within 6 months.  However, this swing is taking much longer than any other in history.  The good news is we are seeing improvement.  Despite the recent rise in interest rates, closed sales volume has slightly increased along with minor improvements in home pricing.  If you are thinking about getting that bigger home, your opportunity to capitalize on the real estate market may be dwindling.  The improvement can be contributed to the lack of inventory along with the decreasing amount of foreclosures on the market.    Right now, the economy could certainly use a little help with consumer confidence and lower un-employment figures.  I believe the real estate economy is what turned our economic conditions and I believe it will be the real estate market that pulls us out of it.  

 

Article Written by: Daniel J. Smith