Staging Properties - News from the Legal Side of C.A.R.

As Realtors, we have access to and are often reminded by our legal team of potential pitfalls. At issue of late is staging and how to do it without misconception for the buyer or putting the seller at risk. We know that staging is important to show a home in it's best light and we always recommend it if the property would benefit. Knowing the limits and specifics of staging is where you make it work to your benefit. Read on!

Staging Properties

Whether it’s in the interest of getting listings or just providing good customer service, staging properties has become increasingly commonplace. Staging can be done in different ways, but generally refers to preparing the home to look its best for photographs, videos and showings. When staging is to be done, there are certain issues that brokers should be aware of when they offer staging services to their clients:
Purchase Agreement and Escrow Considerations Paragraph 9B(2) of the California Residential Purchase Agreement and Joint Escrow Instructions (C.A.R. Form RPA) lists certain items as automatically included with the sale of the property. Some of those, specifically window coverings, “which includes blinds, curtains, drapery, shutters or any other materials that cover any portion of the window,” could be a part of staging materials. Ceiling fans and water features/fountains are also automatically included, as are air conditioners, awnings, pool nets and pool cover or fireplace inserts, gas logs and grates. A buyer viewing staged property may not know whether items, such as those listed above that exist at time of showing, are owned by seller or placed by others as part of staging the home. The buyer could contractually expect them to be part of the sale.

To help address this issue, the final sentence of Paragraph 9B(2) reminds Sellers (and their agents) of the
importance of excluding any items referenced in the contract that are not actually owned by seller:
Note: If Seller does not intend to include any item specified as being included above because it is not owned by Seller, whether placed on the Property by Agent, stager or other third party, the item should be listed as being excluded in paragraph 3P or excluded by Seller in a counteroffer.

Virtual Staging and Risk of False Advertising

In recent years, a new type of staging has started taking place. Often referred to as “virtual staging,” this is the practice of digitally inserting, or deleting, furniture and other items into photographs or videos of the property  for marketing purposes to help a buyer envision what the property could look like. The advantage of virtual staging is that you can avoid all the issues addressed above – the items are not actually in the property, so you don’t have to worry about them being moved in or out of the property, or buyers wanting them included with the sale. But other issues may apply.

Realtors need to use caution and not engage in false or misleading advertising when using virtual staging in their marketing. Digitally changing furniture or fixtures is one thing, but the property itself, inside or outside, or the view, should not be digitally altered in any way that could mislead a potential buyer – without a clear, explicit, warning or notice about the alteration. For example, “Here is what the yard could look like with all brush and debris removed.” Remember, Article 12 of the NAR Code of Ethics states that “REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations.”

Charging Clients for Staging Services

Some brokers include staging services as part of their listing package, while other brokers may charge extra for it as an optional, add-on service. Either way, the services to be rendered and the amount to be paid (if any) should be agreed upon in writing. Any special considerations – such as what happens if the listing expires or is canceled without the property ever being sold – should be addressed in the agreement as well.

Copyright© 2022 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). All rights reserved. August 25, 2022.
 

Homebuying Continues to Pick Up in March 2019

With economic conditions working in favor of homebuyers, REALTORS® reported an uptick in homebuying traffic in March 2019 compared to one year ago, according to National Association of Realtor’s March  2019 REALTORS® Confidence Index Survey.[1] Low mortgage rate, a record low unemployment rate since 1953,  sustained job creation of more than 2 million per year since 2012, and an increase in real wage growth are all working in favor of homebuyers.

 
The REALTORS® Buyer Traffic Index increased to 63 in March 2019 (55 in February 2019), the fourth month of sustained recovery after it dipped to a low of 44 in November 2018 when mortgage rates hit almost five percent. But buyers started house-hunting again as mortgage rates started falling in December 2018 when the Federal Reserve put a hold on interest rate hikes for the year and adopted a patient policy stance. As of the week of May 9, the 30-year fixed rate has climbed down to near four percent, to 4.11 percent.[2] The REALTORS® Buyer Traffic Index leads existing and pending home sales by one to two months so the uptick in the March index indicates a stronger market in May, along with the seasonal uptick in homebuying activity.

Buyer traffic conditions were stable or stronger during the 3-month period of January—March 2019 compared to the same period one year ago in 47 states and in the District of Columbia. However, REALTORS® reported weaker buyer traffic in California, Connecticut, and West Virginia.  Respondents from California have reported the lingering negative impact of the California wildfires on the supply of and demand for homes in affected areas. However, the lower mortgage rates and decline in prices in CA metros such as San Francisco should make homes more affordable and cause a pickup in homebuying activity in the coming months. Respondents from California and Connecticut also reported that high property taxes and the $10,000 limit on the combined itemized deduction for property taxes, state and local income tax (SALT)—  are negatively affecting homebuying.

 

With mortgage rates falling, the mortgage payment arising on a median-priced home at 10 percent down payment has fallen from $1,259 in June 2018 to $1,151 as of March 2019, a savings of $108 per month, which amounts to $38,991 over a 30-year period.

The decline in mortgage rates is not the only positive factor underpinning the pickup in homebuying. Perhaps more important is the strong job and wage growth. The unemployment rate fell to a low of 3.6 percent in April 2019, the lowest since 1953; 2.6 million net new jobs were created as of April 2019 from one year ago; and the number of unemployed fell to 5.8 million from 6.3 million one year ago.  Wages continue to increase at a faster pace than inflation, with average weekly wages rising at nearly three percent in April 2019 from one year ago, ahead of inflation of two percent. Economic conditions are pointing to an increase in homebuying activity, which REALTORS® are seeing on the ground!

 

 Information courtesy of National Association of Realtors

National Association of Realtors Economist's Outlook

Construction and Housing Starts Outlook for 2019—2028

Posted in Economist Commentaries, by Scholastica (Gay) Cororaton, Research Economist on May 1, 2019

Job growth continues to increase strongly, with the economy generating 2.5 million jobs in March 2019 from one year ago. Payroll employment rose in March 2019 from one year ago in all industries except for information services, utilities, and retail trade. With the economic recovery now on its 10th year of expansion, payroll employment has increased by 2.3 million annually since September 2010. With the unemployment rate at a low level of 3.9 percent, wages[1] have also been rising faster than inflation in all major industry groups except transportation and warehousing and manufacturing.
Construction jobs[2] rose by 239,000 in March 2019 from one year ago, the fourth largest source of job growth, next to health care & social assistance, accommodation & food services, professional & technical services, and manufacturing.
In terms of level change, the largest increases in construction jobs occurred in California, Washington, Nevada, Arizona, Texas, New York, Georgia, Florida, and West Virginia. As of March 2019, construction jobs made up a larger fraction of total nonfarm payroll employment—at six to eight percent—in Washington, Nevada, Utah, Idaho, Wyoming, Colorado, Florida, as well as Louisiana and West Virginia.

Notwithstanding the sustained and solid growth in construction jobs, residential construction employment is still below the peak pre-recession level. As of March 2019, there were 550,000 fewer people employed in residential building construction and specialty trades (2.9 million) compared to the peak levels during the housing market boom (3.45 million). Lack of construction labor has constrained the building of new homes, leading to a tight housing market.
In contrast, non-residential (‘commercial’) construction is now slightly above the peak pre-recession level. As of March 2019, there were 26,000 more people employed in the non-residential building construction and specialty trades (3.47 million) compared to the peak level during the housing market boom (3.44 million). The industrial and office commercial sectors have been growing strongly amid sustained economic growth, the penetration of data and technology in every industry requiring data storage facilities, and the expansion of e-commerce which has increased the demand for warehouses and distribution centers.

Housing starts projections for 2019-2028
During 2016 through 2018, jobs in building construction and specialty trade rose five percent on average and there was one housing start per five jobs created. Based on these recent trends, one can project that housing starts will increase from 1.362 million in 2018 to 2.0 million by 2028. In 2019, this means an increase of only 56,000 housing starts, and in 2020, an increase of 57,000 housing starts. This is still below the shortage of about 600,000 units[3] based on household formation and for replacement for obsolete/demolished housing.

Housing supply will continue to remain tight unless constructions job growth accelerates to more than the current annual pace of four percent. Addressing the current housing supply constraints will require collaboration between industries and trade-schools in attracting workers, including women, in construction. The relatively higher wage of construction workers compared to workers in manufacturing, transportation, and warehousing, education and health, retail trade, hospitality, and private industries in general, should attract workers in construction compared to these other industries, if workers are trained in these specialty skilled jobs.
With demand likely to outpace supply, there will also be increasing demand for housing that requires less construction labor, such as panelized and modular construction and manufactured housing.

View the State Employment Monitor report here.

---

[1] Average weekly wages, Bureau of Labor Statistics
[2] The construction industry (NAICS Code 23) is composed of the construction of buildings (residential and non-residential), heavy and civil engineering construction, and specialty trade contractors (residential and non-residential).
[3] Currently, there are 1.1 million housing starts, while household formation is running at about 1.3 million, a deficit of 200,000 units related to household formation alone. In addition, about 450,000 housing units are needed to replace units lost to obsolescence or that are demolished (0.36% of housing stock of 1.127 million units.