Real estate transactions can be stressful in the best of circumstances. Add in emotionally complicated factors like death, divorce, or bankruptcy and you’re looking at a process filled with potential difficulties.

A home is more than a collection of bricks, wood, concrete, and glass. It’s the center of daily activities where people gather, memories are made, dreams are discussed and communities are built.

But it’s also an important financial asset – often the largest asset a person owns – and there are circumstances where that asset must be divided and sold. If all parties with a stake in the property agree on an outcome, this can usually be managed cleanly and swiftly. But in instances of death, divorce, and bankruptcy, emotional intricacies and family dynamics can complicate matters. Grief, feelings of loss, anger, and confusion can drive people apart when they most need to collaborate.

Keith Barrett, Founder of Vesta Settlements, recently met with several of our Associates in a discussion on the thorny issues that can arise in real estate transactions and offered insight on how agents can help their clients maneuver through a maze of legalese, high emotions, and fiduciary constraints. Here are some things he encouraged sellers to keep in mind when navigating these difficult life events.

Death

The death of a loved one can be a challenging situation, sometimes causing a dramatic effect on the ability of the friends or family members to manage and sell real property owned by the deceased. To understand how the real property can be sold, we must first look back to how the decedent took title to the property at the time of purchase.  

Who has the power to convey title when the owner has died? The easiest situations are when there is more than one seller and they held title (ie: were on the deed) with Right of Survivorship, meaning at the moment of death ownership rights transfer to their survivor through either Tenants by the Entirety (which is available only to married couples) and Joint Tenancy, where two or more parties have equal rights of ownership in a property. In both instances, the surviving spouse or surviving joint tenant(s) need only provide a death certificate to the title company. 

A more complicated situation is Tenants in Common, where multiple owners hold title to the property together, but they each own a designated share of the property without the Right of Survivorship. Upon the passing of one owner, their ownership interest passes per their will; if they don’t have a will, then their ownership interest passes per statute in the state of the property (local examples: Section 64.2-200 of the Code of Virginia, Section 42-16 of the Code of the District of Columbia, Maryland Intestacy Law). To sell the property in these situations, the remaining owner(s) must coordinate with the administrator of the decedent’s estate. If the decedent died testate (with a will), then the executor named in the will must file the will with the probate office of the circuit court for the county in which the property lies. If the decedent died intestate (without a will), then one of the descendants must apply with the probate office of the circuit court for the county in which the property lies to be appointed as the administrator of the estate. Once an administrator or executor has been appointed by the probate office, that person may begin the process of selling the property. However, there are mitigating circumstances that may delay the timeline of a sale, depending on the jurisdiction. 

The best way to ensure there are few issues arising following the death of a homeowner is to have a will that designates an heir or executor to authorize the sale of the property. Another option is to establish a Trust, which creates a private fictional entity (a document) that never “dies” and which exists to hold and own assets and gives people control over those assets and avoid probate. 

Divorce

A divorcing or divorced couple can make a real estate sale stressful for everyone involved. Parties can be angry, vindictive, irrational and uncooperative. When a Realtor® is put into the middle of these relationship dynamics, it’s important that all sides feel heard, respected and empowered in their position. An agent wants both parties to stay focused on the goal of maximizing the proceeds of the sale in order for the sellers to move on to their next respective chapters.

For purposes of real estate, a couple can only be considered either married or divorced. This means that even if a couple is separated, they are still married until the court has entered the final divorce decree and property remains under the current title status (see above for Tenants by the Entirety and Joint Tenancy). However, if the divorcing couple has already agreed to a Property Settlement Agreement outlining how the property will be dispensed, it’s important to share that with an agent because the sale of a property can occur before the divorce decree is finalized. 

Parties need to determine how the proceeds are to be divided prior to settlement and if the parties cannot decide on how the proceeds are to be divided, then they must decide where the proceeds should be held (typically, one the divorce attorneys can hold the funds).

Bankruptcy  

Bankruptcy is a form of federal financial protection that is unfortunately often viewed through the lens of shame, embarrassment, and mistrust. There are many reasons a seller can be in dire need of financial relief and it can be one of the most anxiety-producing experiences a person will go through. 

When a petition for bankruptcy is filed, it triggers an Automatic Stay by the bankruptcy court which protects the debtor from their creditors. However, once in bankruptcy, the debtor is also restricted in how they manage and sell assets, including their home. Here are three ways in which a debtor in bankruptcy can sell their home. 

1. A seller could obtain a discharge from bankruptcy, which means that they have completed or are on the way to completing the bankruptcy process and the bankruptcy court has closed their case. At that point, they are no longer under the restrictions of the bankruptcy court, and they can sell their property without needing to ask permission. Of course, this also removes the Automatic Stay so creditors can resume trying to collect on the debt. 
2. They could ask the bankruptcy trustee to abandon the property and move it outside of the bankruptcy. Once the property is no longer a part of the bankruptcy, the debtor can sell the property without needing to have the sale terms approved. A note of caution: When the property is abandoned by the trustee and is outside of the bankruptcy, it is once again subject to creditors, and the bank could restart the foreclosure process if the debtors fall behind on payments.  
3. They could file a motion requesting that the bankruptcy court approve their sale of the property. Under this option, the seller would list the property and ratify a contract subject to third-party approval. The settlement date must take into account the length of time to get the motion heard by the bankruptcy court and for the appeal timeframe to have expired.

A professional Realtor® is your best advocate in these types of transactions, trained with the knowledge to guide clients through the process and ready to provide resources for areas outside their scope of expertise. Keep in mind that an agent cannot offer advice outside their realm of expertise but they can recommend legal professionals to assist in transactions where title transfer may become an issue. Let an experienced McEnearney | Middleburg Real Estate | Atoka Properties Associate be your advocate and supportive guide through any major life event you face. Because it’s not about us… it’s about you.

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If you were to watch an episode of Million Dollar Listing or any of the many other real estate shows you might think you have an idea of what a real estate agent actually does on a day-to-day basis: they spend their days looking at gorgeous properties while driving around town in a fancy car and cashing large commission checks. 

As with many things in life, what you see on TV is seldom an accurate representation of reality. Unless you have recently bought or sold a home, you likely have very little idea about everything that real estate professionals do to serve their clients. So, let’s take a look at just a few of the things an agent must do to be a successful local expert:

Market Knowledge – You’ve probably been at a party or an event, found yourself talking to a real estate agent, and asked them, “How’s the market?” Being able to answer this question accurately, clearly, and with relevant market data is something every agent is expected to do. They have to stay up-to-date with market activity, statistics, trends in pricing, and how one segment of the market differs from another. Our clients rely on us to advise them on pricing and it’s our responsibility to deliver. 

Contracts – The DC Metro real estate market differs from many other parts of the country, and in our region, your agent is responsible for drafting and negotiating contracts on behalf of clients. These are legally binding documents so your agent is always working to understand every word of the contract, some of which can be up to 70 pages! 

Marketing and Advertising – In addition to marketing properties, successful agents put together a comprehensive communication and outreach plan to stay in touch with clients and network with other agents. That can involve client events, mailings, market reports, and much more. 

Business Development – Agents are the CEOs of their own start-up companies and they must have the right strategies in place to be successful. Much like marketing and advertising, most agents will have a business development plan in place to generate more leads and grow their business. 

Social Media Manager – Real estate agents are just like most other businesses in that having a presence on social media and keeping up with ever-evolving trends is imperative.

Financing – Because agents work closely with loan officers throughout the buying process, they must have a strong understanding of myriad financing and loan programs to accurately advise their clients. 

Multiple Jurisdictions – Whether your agent is working in Virginia, Maryland, Washington, DC, West Virginia, or any other state, they must know the difference between them as it pertains to things like tax rates, building restrictions, and much more. 

Costs – It’s an absolute requirement that your agent knows the costs their clients will incur during the purchase or sale of their home. These include things like transfer and recordation taxes, settlement fees, lending fees, home inspection costs, and many more. 

Community Knowledge – A good agent stays continually informed on what’s happening in the communities where they work, including development projects, transportation initiatives, changes to local schools, businesses that might be coming to or leaving the area, and any number of factors that could impact property value. 

Continuing Education – Agents are constantly learning. In addition to continuing education required by every jurisdiction to maintain a license, agents attend national, state, and local seminars and conferences, participate in weekly or monthly brokerage business meetings, and serve on association committees to gain the knowledge that helps them better serve their clients. That’s in addition to the daily industry news they keep up.

These are a few of the many areas where a good real estate agent is a market expert, but this does not include other things an agent does daily like being a therapist, couples counselor, furniture mover, house cleaner, landscaper, babysitter, florist, stager, window washer, trash hauler and so much more. 

We love what we do and we work hard to represent our clients’ best interests but it’s not always as glamorous as it’s portrayed on TV. 

Andy Hill is Executive Vice President and Managing Broker for the Washington, DC and Maryland offices of McEnearney Associates.

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How young is too young to be a homeowner? For the minor children of a top-producing Realtor®, you can’t start soon enough.

Cher Castillo began building her real estate savvy when she was an undergrad at the University of Florida in the late 1990s and found a condo she thought was a great buy at only $40,000. But she needed the help of her mother, who was not enthusiastic about the purchase and passed. 

By the time Cher graduated, that little condo had increased in value to $200,000 and she knew her instincts had been correct. She also knew that one day when she had a family of her own she would encourage them to take the leap into homeownership as soon as possible.

That’s how her sons Cruz and Lincoln both became property owners at age 4.

But before sharing her wisdom with her children, Cher first had to build her own knowledge base. She was finally able to buy her first home after graduating and moving to the DC area at age 22 for a job on Capitol Hill. She beat out 15 other offers and paid $150,000 for a Victorian row home in Eckington that was in need of renovations, which she did herself room by room. 

Along the way, she discovered a love for the property development process and making an income in real estate. She sold the home 2 years later for $450,000 and after purchasing two more properties, she opened her own brokerage at 26.

Fast-forward to the present and Cher’s family includes a blended family of six children, all of whom have an interest in real estate. But it’s the youngest who have – quite literally – become the poster children for building generational wealth through real estate.

Cruz, now 14, became an owner at age 4 with the purchase of a property in Baltimore for the nominal amount of $2,500 (which Cher had negotiated down from $10,000) and without yet doing any improvements have already increased in value to $125,000. 

She asked Cruz, now that he owned a property, what he planned to do with it. He answered, “Renting! That way I get money every month rather than selling it and just get money once.” His ability to conceptually understand the complexities of buying and holding real estate impressed Cher, but Cruz took it in stride. “I listen to you all the time in the car, Mom,” he told her.

Not long after the Baltimore purchase, at age 8 he became the face of Cruz Condominiums, a development with three luxury condos in North East DC. “He really got a turn-key experience in terms of developing and selling with this project,” Cher recalls. Cruz accompanied his mom on project development meetings, renovation tours, and open houses, and was featured in all the property marketing. Cher says that he has a large poster of himself and the condos on his wall at home and is proud to show it off to his friends, who are also curious about real estate.

“We lived on the same block that the condos were being built and kids would come by and ask questions,” Cher says. “They would see my name on the sign and wonder what that meant, and I was able to explain how real estate worked.”

Lincoln followed his big brother and bought his first property in Baltimore City as well and went through the purchase process just like any other buyer, complete with a settlement meeting arranged by an attorney friend of the family.

Obviously, the purchase of real estate property by a minor requires responsible adults to navigate the process, but the homes are indeed in the childrens’ name through an LLC that is connected to a trust that the boys will have access to at age 21. “IF they behave themselves,” Cher jokes. She advises that parents or guardians who want to purchase properties in their kiddos’ names should first consult an attorney and an accountant to ensure legal and financial logistics are buttoned up.

Cher also advises having a trusted Realtor® guide the property search and dig for information about what areas are ripe for investment. “Don’t just buy because it’s cheap,” she cautions. “Is it in an area where development is happening? Is there growth potential? Approach it with an investment mindset.”

She also encourages parents and guardians to involve and educate their children throughout the home

-buying process. “If you are going to do this, walk your kids through it from A to Z so they understand all the parts of the transaction,” she says. “Helping them understand the journey is the part that will make them fall in love with the process.”

To that end, Cher is developing a non-profit she calls Young Moguls, aimed at helping 4-17-year-olds learn how to build a real estate portfolio and generate wealth and equity at a young age. 

The most important thing that Cher wants children and the adults who are guiding them to do is not to wait to buy real estate. “If you show them the possibilities of home ownership as early as possible, they won’t be afraid of it in the future.

Cher Castillo & Family

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Buyers’ Agents are getting a lot of attention thanks to a recent ruling on real estate commissions and it’s important to know why they are crucial to selling a home.

Recent signals by the Federal Reserve to cut rates in the new year are expected to usher in an improved market for buyers in 2024. As interest rates continue to decline it will not only increase buying power but it will also increase inventory as sellers who also need to buy are encouraged by lower mortgage rates to list their properties for sale. At the same time, new home builds are increasing as contractors see their building costs decline.

And with more buyer activity, there will be Buyers’ Agents ready to assist them in the purchase of their next home. Recently, there’s been an intense focus on buyers’ agents’ commissions, thanks in part to October’s Stitzer-Burnett antitrust judgment, which found that the National Association of Realtors® (NAR) and several large real estate franchisors conspired to inflate commissions. The jury awarded damages of more than $1.8 billion and the verdict is being appealed even while similar cases are being filed throughout the country.  

It’s a developing story and one that has many perspectives – sellers, buyers, brokerages, and Realtors® – in the mix. But it’s buyers’ agents who will be key to helping navigate the debate for their clients.

Very simply, a Buyer Agent is a Realtor® or licensed real estate agent who represents the interests of a buyer in a sales transaction. Buyers don’t have to use an agent to buy a home, but most benefit from the knowledge, contract expertise, negotiation skills, and helpful connections during the transaction and beyond that a professional Realtor® provides. 

In our region, a Buyer Agency Agreement is usually the first time a client learns what their agent will do for them during their home purchase process. It outlines the tasks an agent is required to perform as well as what the buyer is responsible for and includes a paragraph about how the Buyer Agent is paid. These agreements have been used in real estate since the 1990s and help ensure that all parties understand the agency relationship – including loyalty to the client, confidentiality about the information shared, fiduciary responsibility, and required disclosures – and offer clients the opportunity to ask questions and negotiate terms before a home search begins. 

But the most important assurance the Buyer Agency Agreement offers is that a client can trust that their agent will represent them to the fullest extent and put their interests first. The seller has their own agent negotiating on their behalf so it makes sense for a buyer to avoid any conflicts of interest by also having their own representative – their champion! – during the sale. In short, a Buyer Agency Agreement ensures transparency and accountability for everyone involved.

Like buyers, sellers can represent themselves, but most hire a real estate professional to list a property and protect their interests during the transaction. In the Washington, DC metro area, the majority of homes are sold with agents, and commissions from these sales are paid to brokerages, most of whom have affiliated agents as independent contractors.

Traditionally, sellers have paid both their listing agent’s fee/commission and that of the buyer’s agent (also called a co-op fee) for bringing a qualified buyer and managing the transaction to settlement. How much commission a seller chooses to pay, and whether to offer a co-op commission, is always negotiable. These fees are disbursed at settlement, meaning both the seller’s listing agent and the buyer’s agent get paid at the end of the transaction. In the meantime, both agent sides are incurring business and operating costs that they will pay with the commissions they eventually earn from their brokerages.

One of the arguments in favor of co-op fees is that it helps buyers’ purchasing power. If buyers were required to pay the agent’s fee it would greatly reduce buying power, adding commission expense on top of hefty down payments, closing costs, and inspection fees. This would significantly impact first-time, FHA, and veteran (VA) buyers, especially those with limited equity and generational wealth. Rising home prices have already kept many of these buyers on the sidelines and could exclude an entire group of would-be homeowners. Many in the industry worry that buyers will instead choose to be unrepresented in a transaction rather than hire an agent, opening themselves up to being at a disadvantage during negotiations, inspections, deadlines, and appraisals.

While the co-op fee is at the heart of the debate in the NAR and brokerage lawsuits, it doesn’t take away from the expectation that professionals like Realtors® should be paid fairly for their work in representing their clients and their clients’ goals of homeownership. The question of who will pay for that compensation is one of the most hotly debated topics in real estate right now and will be for some time to come.

Don’t be afraid to ask your agent about commissions and how they may affect your home purchase. A professional McEnearney Associates | Middleburg Real Estate | Atoka Properties agent is ready to answer all questions, provide guidance and clarification, and get to work representing you!

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Homeownership is not for everyone. Is that a bad thing and what does it cost in the long run?

There are times when homeownership makes sense, but is this one of those times? For many, the combination of inflation, high interest rates, and steadily increasing home prices has put homebuying plans on hold, especially for Millennials and Gen Z buyers who have less purchasing power due to lower incomes, more debt, and less equity.

In a pricey area like ours, the pinch is even worse. The DC area’s cost of living was reported this spring to be 53% higher than the national average, while the housing portion of overall costs was a whopping 144% higher. Combined with a growing population that hasn’t kept pace with housing inventory, the supply-and-demand pressure continues to keep rents high, although there are some signs the climb may be leveling. In August it was reported that the average monthly rent in DC was $1,901/month, Virginia was $1,594, and Maryland was $1,741.

About 40% of the DC metro area is made up of renters and a growing number of them report spending more than half of their monthly income on rent. A November report from Virginia Association of Realtors showed that compared with homeowners, renters are carrying more than two times higher housing costs. Data from the Census Bureau indicates that as of 2022 about 50% of renters were housing cost-burdened in Virginia, while only 20% of homeowners were housing cost-burdened (meaning 30% or more of monthly income was going toward housing costs).

But even with the financial burdens that renting can bring, it may actually be better for some in the long run to stay in tenancy. Because while rental prices have climbed, so have purchase prices. High list prices coupled with high interest rates mean it now costs 52% more to own a home than to rent.

The podcast The Daily from The New York Times covered this recently and reviewed the financial paths that buyers and renters take on the way to building wealth. On one path, renters hold off on buying and investing what would have been a down payment in another way; as the investment grows the renter can increase their buying power for a time when overall housing costs may be lower. On the other path, homeowners navigate the initial high costs of buying a home and are rewarded (eventually and hopefully) with equity that grows over years of ownership.

Here are a few things to consider when deciding which is the better path for you right now. Because the market can and will shift, and “timing the market” is almost never a successful strategy.

How long do you plan to stay in the home?

If it’s less than 5-7 years, it makes more sense to rent and invest cash elsewhere. Use a rent ratio calculator to determine your relative cost of renting versus buying.

How steady is your income?

Annual rent increases can be unpredictable and plenty of tenants have been surprised by a sudden unexpected hike. For the most part, mortgage payments are consistent over the term of the loan (allocating for increases in taxes, insurance, and amenity fees) and easier to budget around in the long term. 

What is your budget (or patience!) for home repairs?

As a renter, home maintenance costs are borne by the landlord. If something goes wrong, you pick up the phone and someone else takes care of it. As a homeowner, you can expect to pay about 1% of the home’s purchase price every year toward home maintenance. But there are also big-ticket repairs – like a new roof, appliance upgrades, and systems repairs – that will unexpectedly take a bite out of your budget.

What is your lifestyle?

Do you like exploring new neighborhoods? Are you a traveler and want the flexibility of trying on a new city for a while? Could a major life milestone be on the horizon? Do you simply want a low-maintenance living situation? Renting offers many benefits for people who don’t want to be tied to the responsibility of paying for and maintaining a home.

The National Association of Realtors has many resources to help decide if homeownership is the right move and where to find first-time homebuyer assistance, as well as reporting relevant data to understand current market dynamics.

And, when you’re ready to find a fantastic new rental or take the first step toward homeownership, be sure to connect with an amazing agent at McEnearney Associates!

Take a look at our website for all of our listings available throughout Washington, D.C., Maryland, and Virginia.

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