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Tag: seller

  • Housing Tracker: Southern California home values drop in December

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    Southern California home prices dropped again in December, capping off a yearlong skid that saw the average home value in the six-county region drop by more than $7,000.

    In December, the average home price fell to $854,993, according to data from Zillow. Prices were down 0.1% month over month and 1.3% year over year.

    It’s the lowest that Southern California home values have been since March 2024.

    Economists and real estate agents say a variety of factors have slowed the market, including high mortgage rates, rising inventory and economic uncertainty stemming from tariffs.

    Until the recent declines, July 2023 was the last time that year-over-year prices had fallen. Back then, rising mortgage rates were knocking many buyers out of the market. Values started increasing again when the number of homes for sale plunged as sellers backed away, unwilling to give up mortgages they took out earlier in the pandemic with rates of 3% or lower.

    Real estate agents say homeowners increasingly want to take the next step in their lives and are deciding to move rather than hold on to their ultra-low mortgage rates. But many first-time buyers, without access to equity, remain locked out.

    Add on the economic uncertainty and you get a market that’s noticeably downshifted.

    If the Trump administration’s policies end up pushing the economy into a recession, some economists say home prices could drop much further.

    In L.A. County, many sellers took their homes off the market over the holidays. There were 16,655 homes on the market (a 9% drop from November) and only 3,520 new homes were put up for sale (a 19% drop from November).

    For now, Zillow is forecasting that the economy will avoid a recession and home prices will increase over the next year. The real estate firm expects that next year, home prices will rise 1.2% both nationally and in L.A.

    Note to readers

    Welcome to the Los Angeles Times’ Real Estate Tracker. Every month we will publish a report with data on housing prices, mortgage rates and rental prices. Our reporters will explain what the new data mean for Los Angeles and surrounding areas and help you understand what you can expect to pay for an apartment or house. You can read last month’s real estate breakdown here.

    Explore home prices and rents for September

    Use the tables below to search for home sale prices and apartment rental prices by city, neighborhood and county.

    Rental prices in Southern California

    In December, the median rent across Los Angeles dropped to $2,167, the lowest it has been since January 2022. Rents dropped for the fifth consecutive month.

    The downward trend has continued in most markets across L.A. County. However, in Orange and Ventura counties, rents have risen slightly year over year.

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    Jack Flemming, Hailey Wang

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  • Historic film studio hits the market at top dollar even as filming dips

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    One of the oldest movie studios in Los Angeles is up for sale, perhaps to the newest generation of content creators.

    The potential sale of Occidental Studios comes amid a drop in filming in Los Angeles as the local entertainment industry faces such headwinds as rising competition from studios in other cities and countries, as well as the aftermath of filming slowdowns during the pandemic and industry strikes of 2023.

    Occidental Studios, which dates back to 1913, was once used by Mary Pickford and Douglas Fairbanks to make silent films. It is a small version of a traditional Hollywood studio with soundstages, offices and writers’ bungalows in a 3-acre gated campus near Echo Park in Historic Filipinotown.

    Kermit the Frog above the Jim Henson Company studio lot in Hollywood.

    (AaronP/Bauer-Griffin/GC Images)

    The seller hopes its boutique reputation will garner $45 million, which would rank it one of the most valuable studios in Southern California at $651 per square foot. A legendary Hollywood studio founded by Charlie Chaplin in 1917 sold last year for $489 per foot, according to real estate data provider CoStar.

    The Chaplin studio, known until recently as the Jim Henson Company Lot, was purchased by singer-songwriter John Mayer and movie director McG from the family of Muppets creator Jim Henson.

    Occidental Studios may sell to one of today’s modern content creators in search of a flagship location, said real estate broker Nicole Mihalka of CBRE, who represents the seller.

    She declined to name potential buyers but said she is showing the property to new-media businesses who don’t present themselves through traditional channels such as television shows and instead rely on social media and the internet to reach younger audiences.

    An entrance at Occidental Studios.

    Occidental Studios, which dates back to 1913, was once used by Mary Pickford and Douglas Fairbanks to make silent films.

    (CBRE)

    New media entrepreneurs may not often need soundstages, “but they like the idea of having the history, the legacy” of a studio linked to the early days of cinema, she said. It might lend credibility to a brand and become a destination for promotional activities as well as being a place to create content, she said. Mihalka envisions the space being used for events for partners, sponsors and advertisers as well as press junkets for new product launches.

    Entertainment businesses located nearby include filmmaker Ava DuVernay’s Array Now, independent film and production company Blumhouse Productions and film and production company Rideback Ranch.

    Neighborhoods east of Hollywood such as Los Feliz, Silver Lake, Echo Park and Highland Park have become home to many people in the entertainment industry, which Mihalka hopes will elevate the appeal of Occidental Studios.

    “We’ve been seeing film and TV talent heading this way for a while,” she said, including executives who also live in those neighborhoods.

    The owner of of Occidental Studios said it’s gotten harder for smaller studios to operate in the current economic climate that includes competition from major independent studio operators that have emerged in recent decades.

    “Once upon a time, you did not have multibillion-dollar global portfolio companies swimming in the waters of Hollywood,” said Craig Darian, chief executive of Occidental Entertainment Group Holdings Inc., citing Hudson Pacific Properties, Hackman Capital Partners and CIM Group. “They are not content producers, but have a long history of providing services for multiple television shows and features.”

    Competition now includes overseas studios in such countries as Canada, Ireland and Australia, he said. “When production was really robust and domiciled in Los Angeles, it was much easier to remain very competitive.”

    Another factor threatening the bottom line for conventional studios is rapidly changing technology used to create entertainment including tools as simple as lighting.

    “You used to know that equipment would last for decades,” Darian said. “The new tools for production are becoming obsolete in far shorter order.”

    Writers' bungalows at Occidental Studios.

    Writers’ bungalows at Occidental Studios.

    (CBRE)

    Nevertheless, Darian said, the potential sale “is not motivated by distress or urgency. Nothing is driving the decision other than the timing of whether or not this remains to be a relevant asset to keep within our portfolio. If we get an offer at or above the asking price, then we’re a seller.”

    Darian said he may also seek a long-term tenant to take over the studio.

    Occidental Studios at 201 N. Occidental Blvd. comprises over 69,000 square feet of buildings including four soundstages and support space such as offices and dressing rooms.

    It’s among the oldest continually operating studios in Hollywood, used by pioneering filmmakers Cecil B. DeMille, D.W. Griffith and Pickford, who worked there as an actor and filmmaker in its early years. She reportedly kept an apartment on the lot for years.

    More recently it has been used for television production for shows including “Tales of the City,” “New Girl” and HBO’s thriller “Sharp Objects.”

    Local television production area declined by 30.5% in the first quarter compared with the previous year, according to he nonprofit organization FilmLA, which tracks shoot days in the Greater Los Angeles region. All categories of TV production were down, including dramas (-38.9%), comedies (-29.9%), reality shows -(26.4%) and pilots (-80.3%).

    Feature film production decreased by 28.9%, while commercials were down by 2.1%, FilmLA said.

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    Roger Vincent

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  • Southern California prices are at a record. Could relief be on the way?

    Southern California prices are at a record. Could relief be on the way?

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    Southern California home prices hit a record for the third-straight month in May, but there could be some help on the horizon.

    Although home prices increased, more listings are finally coming onto the market, giving cash-strapped home buyers more options.

    What is happening?

    In May, average home prices across the six-county region rose nearly 1% from April to $875,409, according to data from Zillow. It was the third consecutive month that prices hit a record and values are now 9% above May 2023 levels.

    Why are home prices rising?

    Simply put, there are too few homes for sale in Southern California for all the people who want to buy here.

    Economists and real estate agents say the long-running problem was made worse after mortgage rates surged in 2022.

    At first, home prices fell as buyers pulled away and the inventory swelled. But prices started rising again last year as homeowners increasingly chose not to sell, unwilling to give up rock-bottom mortgage rates on loans taken out before and during the pandemic.

    The pullback among sellers became so prevalent that it even got its own name: the seller strike.

    What is happening with inventory?

    Things are improving. As interest rates stay higher for longer, more homeowners are deciding to get on with their lives and list their home for sale, deciding additional space, a new job or other factors are more important than keeping a 3% mortgage.

    In April, most Southern California counties saw the total number of homes for sale increase for the first time since the first half of 2023.

    Last month, inventory jumped again. In Los Angeles County, total listings were 13% higher in May compared with a year earlier; Orange County rose by 6%; in Riverside County, 14%; San Bernardino County, 15%; Ventura County, 18%; and San Diego County, 30%.

    “That’s a very positive development,” said Stuart Gabriel, director of the UCLA Ziman Center for Real Estate. “We have just been incredibly short on supply.”

    If I a want to buy a home, what does the inventory increase mean for me?

    Well, at the most basic level, there will be more options from which to choose.

    Inventory is still very low historically so don’t expect your home search to be a breeze, but it could mean fewer bidding wars and an easier time getting into a house.

    Gabriel said the inventory increase probably isn’t enough to send home prices down, but, if the trend holds, home prices should rise less than they are today.

    Mike Simonsen, founder of real estate data firm Altos Research, said sellers are already more likely to trim their list prices than last year.

    He doubts that overall values will turn negative this year and, like Gabriel, expects only slowing appreciation in the L.A. area. But that could change in 2025.

    “If rates are still in the 7s, prices flat or down is a real scenario,” Simonsen said.

    On the other hand if rates noticeably drop, Simonsen said, demand is likely to pick up more than inventory, setting the stage for home prices to rise even faster than they are now.

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    Andrew Khouri

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  • $10,000 reward offered after gold nugget reported stolen in Long Beach

    $10,000 reward offered after gold nugget reported stolen in Long Beach

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    A massive gold nugget was reported stolen Thursday from the Long Beach Convention Center, spurring an offer of a $10,000 reward.

    Bob Campbell, the owner of a coin shop in Salt Lake City, said he brought the gold nugget to the Long Beach Expo — a show that gathers sellers of coins and other collectibles — to sell for more than $80,000. He said its value exceeds its sheer content in gold, as an “original 49er nugget” believed to date back to the Gold Rush.

    “They will lose money if they melt it. It has collector value,” Campbell said. The roughly 27-ounce nugget was about the size of a goose egg, he added, and specimens of that size are “exceedingly rare.”

    Video captured by another coin dealer at the event shows someone appearing to press on the display case, then pocket something. Campbell faulted a defect in the case that allowed the thief to wiggle his hand inside.

    Long Beach police said they are investing the theft, which was reported before noon Thursday. Campbell is also passing out fliers with a photo of the gold nugget and the alleged thief and personally offering a $10,000 reward hinging on the arrest and conviction of the perpetrator.

    “We’re hoping that this information gets out” and maybe “one of his friends will rat him out,” Campbell said.

    He urged anyone with information to call his Utah shop at (801) 467-8636 or to contact the Long Beach Police Department regarding case number 24-28245.

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    Emily Alpert Reyes

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  • Realtor rules just changed dramatically. Here’s what buyers and sellers can expect

    Realtor rules just changed dramatically. Here’s what buyers and sellers can expect

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    So long, 6% commission.

    For decades, real estate commissions have been somewhat standardized, with most home sellers paying 5% to 6% commission to cover both the listing agent and the buyer’s agent.

    On Friday, everything changed.

    A landmark agreement from the National Assn. of Realtors paved the way for a new set of rules that will likely shake up the entire industry, affecting sellers, buyers and the agents tasked with pushing deals across the finish line.

    The most pivotal rule change pertains to how buyers’ agents are paid. Traditionally, home sellers have paid for the commission of both their agent and the buyer’s agent, which critics argue stifled competition and drove up home prices.

    The new rule prohibits most listings from saying how much buyers’ agents are paid, removing the assumption that sellers are on the hook for paying both agents.

    The other new rule requires buyers’ agents to enter into written agreements with their clients, known as buyer brokerage agreements. These agreements outline exactly what services will be provided — and for how much.

    The changes will take effect this July, pending court approval, and will have major implications on how real estate deals are done. Here’s how buyers, sellers and brokers will likely be affected.

    Lower fees for sellers

    The most obvious takeaway is that if buyers end up paying for their real estate agents instead of sellers, sellers are set to save a lot of money.

    In February, the average Southern California home sold for $842,997. Under the old system, where sellers pay both agents 3% commission, they’d shell out $50,580. But if they only have to pay one agent 3%, they’d save $25,290.

    Buyers, then, would be the ones footing the bill for their agent. The added expense might seem pricy, but Michael Copeland, a real estate agent in Palm Springs, said the final numbers might ultimately shake out the same under the new rules.

    “Buyers were often told by their agents that they didn’t have to pay anything and that services were free,” Copeland said. “But that’s not necessarily true.”

    Copeland said when sellers pay 6% commission to split between both agents, they pad that number into the purchase price, so buyers actually end up paying more for the home, and thus, pay for their own agent.

    So under the new system, buyers may end up paying their broker 3% commission, but the price of the home might be cheaper since the seller is only paying for their own agent.

    More flexibility for buyers

    One of the biggest complaints about the previous system was that it left buyers out of the negotiation process. Sellers paid each agent’s brokerage 3% or so, and that was that.

    Lawsuits filed against the National Assn. of Realtors alleged that the practice kept commissions artificially high and incentivized buyers’ agents to “steer” them toward properties that offered them higher commission rates.

    But under the new system, more buyers will be negotiating directly with their own agents — not just how much they’ll pay them, but what services they want the agent to provide. And those expectations will be specifically outlined in the buyer brokerage agreements, which are now required.

    “Some buyers may just hire an attorney and pay a fee to handle the transaction,” Copeland said. “Or they’ll want to hire an agent as a consultant. Someone they can ask questions.”

    In the age of the internet, access to real estate information is at an all-time high. Buyers can know virtually anything about a home on the market: not just bedrooms, bathrooms and square footage, but how much the home previously sold for, and how much similar homes in the area are selling for.

    Buyers can also receive alerts to know exactly when a house in their price range hits the market, so some savvy shoppers might opt for an agent who leaves the touring process to them, but can help them look over an inspection report and file the right paperwork in the closing stages of the deal.

    If a buyer wants a robust, hands-on agent that’s available 24/7, they can offer 3% or even more. If they want an agent who can just handle the more technical elements of the deal, they could offer 1% or 2%.

    Some buyers might try to handle the process themselves and not pay an agent at all.

    “Good agents will be able to show their value,” said Compass agent Michael Khorshidi. “Agents who aren’t able to show their value won’t benefit from this.”

    New dynamics — and roles — for agents

    For many agents, representing buyers can be rewarding since they get to help someone find their dream home, but the process is often more time-intensive. Agents might spend weeks or months setting up tours for clients, and there’s no guarantee that they’ll even buy a property in the end.

    For that reason, many veteran agents prefer to represent sellers. The work is often more efficient — especially in a hot market, where deals can close in days.

    So if the new rules leave less guaranteed money on the table for buyers’ agents, those agents might try to switch sides and only represent sellers. Or if they’re not able to make enough money representing buyers, they might exit the industry altogether — a trend that’s already taking place in Southern California’s cold post-pandemic real estate market.

    Brent Chang, a luxury agent active in San Marino and Pasadena, said the new rules could lead to agents who specialize in specific types of sales.

    “Just as there are agents like me who specialize in selling landmark properties, a new group of agents will emerge who specialize in helping buyers with highly competitive properties,” Chang said.

    He said agents who have a proven track record of winning properties for their clients will be able to demand higher commissions.

    Or their deals can be performance based. For example, an agent could represent you for 3%, and if they get the property for you, it’s another 3%.

    “Ultimately, if the ruling leads to buyers receiving better service from their agents, then it has merit,” he said. “But I suspect it’ll be a while until we understand the consequences of these changes.”

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    Jack Flemming

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  • Robocalls, ringless voicemails and AI: Real estate enters the age of automation

    Robocalls, ringless voicemails and AI: Real estate enters the age of automation

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    Southern California’s real estate market is as cold as the snow currently adorning the peaks of its mountains. Interest rates are up. Inventory is down. And deals are few and far between.

    In slow markets, the agents at the top — those with experience, connections and plenty of clients — typically maintain a modest but steady stream of business. It’s the agents at the bottom — those just getting into the industry who’ve only managed to close a handful of sales — who starve.

    As those agents have grown more desperate for leads, they’re trying alternative ways of finding them. Some are outsourcing the work overseas, and others are turning to AI or automation in a last-ditch attempt to find a seller.

    During the record-breaking pandemic market, there were so many transactions that most determined real estate agents were able to make a living. More than 43,000 single-family homes traded hands in L.A. County in 2021, and more than 42,000 were sold in 2022, according to the Multiple Listing Service.

    During that time, tens of thousands joined the National Assn. of Realtors, or NAR, with membership swelling to a record 1.6 million in 2022, up 200,000 since 2020. Real estate wasn’t just a solid job; it was a way to leap into a higher tax bracket.

    But then the market started to freeze in 2023 as mortgage rates shot up. Only 11,539 single-family homes sold that year, and sales are at a similar pace so far this year.

    Some agents are simply calling it quits. In California alone, NAR lost 9,723 members from December 2023 to January 2024 — a 4.75% decline . But even after the drop, California still holds the second-most active Realtors in the nation at 194,964, and they’re all fighting for an extremely small pool of sellers.

    At the peak of the pandemic market, Tyler Andrews, 29, tried his hand at real estate in the Inland Empire, thinking he would use his outgoing personality to sell homes as L.A. residents flocked to the area during the pandemic. He got his license and helped a few friends with their house hunts, but ultimately didn’t earn any commission and stopped in 2023.

    He’s one of many agents who rushed into real estate hoping for a taste of California’s latest gold rush.

    From the outside, listing a house in a hot market seems like the easiest of get-rich-quick schemes. Homes sell in days, and a 3% agent’s commission on a $1-million sale comes out to $30,000. If you represent both sides of the deal, it turns into $60,000.

    But the real estate industry isn’t an easy one to break into. You typically get paid only if you close a sale, and in any market, most homeowners still prefer to go with an agent with experience.

    In a hot market, sellers find an agent. In a cold market, agents have to find a seller. The situation is coming to a boil in many areas, such as Leimert Park, where residents have been barraged by agents asking whether they’re interested in putting their homes up for sale.

    Cold calling is time consuming — and stressful, considering the ire it draws from those on the receiving end. So some agents are handing that thankless task to machines.

    A handful of companies such as Slybroadcast and Salesmsg offer “ringless voicemail,” a robocall-adjacent tool enabling agents to send pre-recorded messages straight to your voicemail box without your phone ever ringing. The messages are often meant to trick you into thinking you missed a call, saying things like, “Sorry I missed you! Give me a call back whenever you get a chance.”

    In 2022, the Federal Communications Commission declared the trend a form of robocalling and said it’s illegal if the caller doesn’t have the recipient’s prior consent. But that hasn’t stopped agents from sending out such voicemails to potential clients.

    “I don’t have time to cold call all day,” said one real estate agent who asked to remain anonymous due to the potential taboo of using the technology. “I have to find clients somehow, and in a market like this, you have to get creative.”

    The thinking is this: An agent could spend eight hours a day calling every home in a neighborhood to ask whether they want to sell their home. Or they could send out 500 ringless voicemails simultaneously, and those who bother to call back have a better chance of needing the services of a real estate agent.

    Andrews said he had heard of other agents trying such technology as the market got colder in 2023, but he never bothered doing it himself because it didn’t seem authentic. It also would’ve been an extra expense — one he didn’t have a budget for.

    Mary Thompson has owned her home in Beverly Crest for more than a decade. Over the last year, she’s received multiple ringless voicemails asking whether she wants to list or buy a house.

    “I was fooled by the first one. I called back and ended up on the phone with an agent for 15 minutes asking about my plans as a homeowner,” she said. “I don’t bother calling back anymore.”

    U.S. consumers received more than 55 billion robocalls in 2023, 5 billion more than the previous year, according to the YouMail Robocall Index. Roughly 15 billion were telemarketing calls, and 8 billion were scams. California consistently ranks as the state with the second-most robocalls, behind only Texas.

    As a response to thousands of unwanted call complaints, the FCC has established a Robocall Response Team to combat the influx of robocalls, many of which are targeted toward homeowners.

    Last year, the commission shut down a robocalling campaign from MV Realty, a real estate brokerage that was sending out robocalls with misleading claims about mortgages. A whistleblower from the company told a Seattle news outlet that employees were directed how to use software called PhoneBurner and required to make at least 450 calls per day.

    Other companies such as VoiceSpin give agents access to auto-dialing software, which, like it sounds, automatically dials numbers from a list. VoiceSpin claims to use AI and machine learning and enables agents to drop voicemails straight into inboxes, record calls or even use local area codes so you’re more likely to pick up.

    In that case, you’d be talking to an agent, but sometimes you might find yourself unwittingly conversing with a robot.

    The tech company Ylopo recently uploaded a video showcasing an AI assistant conversing with a potential home buyer planning a move to the North or South Carolina coast. The company said it’s “one of thousands of AI calls being made daily already for Ylopo clients.”

    Cinc, a real estate lead generation platform, offers agents an AI-powered digital assistant that purposefully misspells words and uses emojis to make interactions with potential leads appear more human.

    The NAR itself offers an AI scriptwriter powered by ChatGPT that analyzes housing trends so that agents can appear more knowledgeable about the market. Agents can even choose the tone: professional, engaging or conversational.

    Earlier this month, the FCC continued its fight against robocalling by outlawing robocalls that use AI-generated voices. Since the ruling is so fresh, it’s unclear how companies utilizing the technology will be affected.

    In a market as slow as this one, even finding numbers to call becomes a challenge; tech becomes useless if it’s being wasted on the wrong potential clients. So many agents are looking for leads.

    On Fiverr, an online marketplace for freelance services, a glut of listings has popped up offering agents potential leads on prospective buyers or sellers. One of the most prolific is Abhishek Rai, who has racked up more than 3,000 five-star reviews offering leads on motivated sellers, vacant properties or absentee owners since joining the platform in April 2020.

    Rai, who’s based in India and uses the handle @virtualguy2020, typically charges $10 for 100 leads, $50 for 650 and $100 for 1,500.

    “Real estate agents have demanding schedules, and outsourcing lead generation tasks allows them to focus on other aspects of their business, such as client meetings, property showings, and negotiations,” he said.

    Rai has clients across the U.S., including many in Southern California. He added that generating leads is a specialized skill and not every agent has the expertise to find them on their own.

    For his leads, he combs through public records, online databases and real estate sources such as property records, tax records and foreclosure listings.

    To be clear, the vast majority of agents in Southern California still conduct business the old-fashioned way. But the ones trying new things are often doing so in order to make a living.

    In 2022, Realtors with 16 or more years of experience made a median gross income of $80,700, according to the NAR. But those with two years or less experience made just $9,600.

    According to a report from business networking platform Alignable, 31% of real estate firms struggled to pay rent for their office in January.

    AI’s subtle invasion of the real estate industry doesn’t necessarily come as a surprise because the technology has pervaded nearly every profession over the last few years. But for an industry that has long relied on human connection — handshakes, open houses, fresh flowers and other personal touches — AI’s cold, sterile seep into housing has become unnerving for some.

    “When I do need a real estate agent, I need one that I can connect with,” Thompson said. “I don’t want anything to do with their AI assistant.”

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    Jack Flemming

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  • Are high interest rates stopping you from buying or selling a home?

    Are high interest rates stopping you from buying or selling a home?

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    Earlier this year, mortgage interest rates came off their 2022 highs and settled in the 6% range, providing a small break for those in the housing market.

    That respite is now over. In recent weeks, rates have shot back above 7% and are now rapidly approaching 8%. The recent surge threatens to scramble the economic calculus for both buyers and sellers.

    If you’ve put a pause on your decision to buy or sell a home because of high rates, The Times would like to speak with you. Please fill out the form below.

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    Andrew Khouri

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  • The Limits Of Caveat Emptor In Real Estate Sales

    The Limits Of Caveat Emptor In Real Estate Sales

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    Traditionally, when a property owner agreed to sell real property, it was up to the buyer to check out the real property as much as they wanted. If the buyer liked what they found, they could go ahead and buy the real property. If they didn’t, they could go buy other real property instead. The buyer bore the burden of understanding the real property being sold, including whatever deficiencies it had. If the buyer acquired the property and later found issues or problems with it, those were the buyer’s problem. The buyer ordinarily wouldn’t have a claim against the seller.

    Those ancient principles of “caveat emptor” (let the buyer beware) have eroded significantly over the years in real estate. State legislatures have tried to improve the residential sales process by requiring sellers to disclose certain information. In commercial real estate sales, buyers typically demand that sellers provide a package of representations and warranties, assurances about the property. Those assurances mostly relate to factual matters a buyer can’t readily check out for itself. A seller can’t just shrug its shoulders and tell the buyer to make up its own mind about the property without involving the seller.

    Even with those changes in law and practice, caveat emptor still retains some vitality in the modern world. It often remains the general backdrop for real estate purchases, to the extent that disclosure laws and representations and warranties don’t apply. A typical purchase and sale contract will still say that the seller doesn’t make any assurances at all about the property, except for any mandated residential disclosures and any representations and warranties negotiated in commercial sales. Subject to those exceptions, standard contract language requires any buyer to acknowledge that it isn’t relying on the seller for anything; has made its own investigations of the property; and accepts the property totally “as is.”

    That typically makes sense because the property is what it is. The seller is typically selling something that’s “used.” It’s not perfect. And a buyer can in fact dig around as much as it wants, analyze the property on offer, and decide whether the buyer likes whatever is being sold.

    The courts do generally still enforce “caveat emptor” concepts in contracts, subject to the exceptions described above. A recent New York case demonstrated another exception that will sometimes apply. Although the facts of the case are sparse, it appears the seller of residential real estate may have given limited disclosures to the buyer, none of which applied to the problems the buyer later discovered.

    After the closing, the buyer figured out that the seller had, according to the court, “actively concealed” water damage at the property by installing fresh new wood over areas in the house where the wood had rotted. By taking affirmative steps to conceal problems with the property, the court decided that the seller may have committed fraud. That was true even though the contract contained the usual “caveat emptor” language and the seller hadn’t given any assurances about the wood at issue. According to the court, the seller’s efforts to hide the rotten wood “might have thwarted the plaintiff’s efforts to fulfill their responsibilities imposed by the doctrine of caveat emptor.”

    The court issued its decision early in the litigation process, so it’s not a final determination. The court did allow the litigation to proceed, concluding that the caveat emptor language in the contract didn’t necessarily save the seller from possible liability.

    Although caveat emptor remains mostly alive and well, subject to the exceptions described above, the case teaches that an unhappy buyer might still recover damages from a seller that affirmatively conceals bad facts about the property. As a practical matter, and regardless of what a contract says, sellers should think twice before they make changes to a property that might make it appear better than it really is.

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    Joshua Stein, Contributor

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