Climate change on earth is very real as temperatures continue to rise higher to create extreme weather conditions. Therefore, it is necessary for real estate owners to ensure they have the right measures set in place to avoid any negative impact from upcoming extreme weather situations. Workers in the insurance industry are keeping a close watch on the changes in weather because certain weather conditions can increase the premiums on insurance plans or change the rules in different regions. There are some risks of climate change that cannot be insured, and in those cases the reinsurer’s approach is very important to primary insurers. Reinsurers will raise the rates for primary insurers as severe weather creates more loss, and then the primary insurers will raise the costs for those who buy insurance like tenants and property owners.
Climate change and severe weather has made it so that real estate investors must really understand the importance of surviving the risks of bad weather by creating a strategy that will decrease losses. Some companies have chosen holistic methods to protect themselves such as climate change related shareholder activism and the possibility of huge lawsuits. There could be less renters in demand for several reasons related to weather including bad storms and floods, heatwaves, wildfires, drought, and water stress. It is also possible for damage to nearby buildings and homes to make it so that tenants cannot access their own building and when this happens, real estate owners must deal with the risk of climate change and severe weather affecting their income even when their own building is protected from extreme weather issues.
Since climate change can pose such huge risks to financial systems all over the world the Task Force on Climate-related Financial Disclosures (TCFD) was created by the Financial Stability Board. The TCFD makes sure climate-related financial information and risks are reported faster and with more information. These bad weather risks are just like any other financial risk and can be disclosed in a company’s profit and loss account. As long as real estate owners and managers understand that they cannot ignore climate risk and instead decide to assess the risk and opportunities with climate data, everyone in the real estate business will be able to build resilience from severe weather troubles and create much better outcomes.
Closing costs comprise a large chunk of what you might have to pay for as a borrower and property buyer. Failing to factor closing costs into your budget can have a detrimental impact towards your ability to keep up with your mortgage payments. Here is everything you need to know about closing costs.
What Is It?
Closing costs, as the name implies, refer to the costs that a borrower must pay when he/she finalizes the purchase of a property, be it residential or commercial. While these costs can add up to a considerable sum, both parties involved in the transaction shoulder a portion of the closing costs.
What Fees are Involved?
The seller pays a number of the fees that make up the closing costs of a property he/she is trying to sell. These include the real estate broker’s commissions, which can easily reach up to six percent of the property’s purchase price. Other expenses included in the closing costs are your application fees, legal representative’s fees, and any discount points that are useable. Taxes are also tacked into a property’s closing costs, which can sum up to about 15 percent of the agreed-upon purchase price.
What is a Title Search?
Another common cost category you’ll encounter when trying to close on a property is title search. A third-party company performs a comprehensive background check of the property to make sure there are no undisclosed heirs and unpaid claims on the property being sold. Home buyers are also expected to pay title insurance fees, which basically covers the policy holder of any costs associated with ownership issues.
How Do You Minimize Closing Costs?
One way to minimize your closing costs is to pay cash for the property. You can reduce your total costs by as much as 1 percent of the property’s purchase price. You also effectively eliminate fees, such as loan origination and appraisal charges. You can also cut your closing costs, as a buyer, by foregoing the services of a realtor. Instead, deal directly with the owner. While this means more due diligence required on your part in order to make sure the transaction is completed properly, it helps you avoid the hefty commissions paid out to a realtor.
Make sure you fully understand your exact closing costs before you even sign any paperwork or give a confirmation to the other party involved. You can find a number of free closing cost calculators online that can help you determine your estimates.
Every city, state and country has residential and commercial real estate development plans that are currently underway. In addition, every society has social problems that increase the difficulty of work for real estate developers. The following issues are likely to affect the success of real estate projects now and in the future.
Delays in real estate projects can last for years longer than expected. These delays may be the result of social problems, such as decreased funding for residential projects or reduced needs to relocate in the case of remote workers. Untimely delays are some of the worst problems to affect real estate developers and their clients.
Increased immigration results in increased demand for affordable, multifamily housing. In addition, massive surges in immigration may happen very quickly and result in overcrowding in certain cities. This puts increased pressures on urban, suburban and rural communities to accommodate these changes quickly.
Climate change is one factor that fuels many people to immigrate from one city or country to another. They may have experienced a natural disaster, such as a hurricane or flood, that destroyed their property, forcing them to relocate.
Global warming has increased the number of hurricanes that occur worldwide. The result is increased flooding that has made it more difficult to plan and develop projects.
Technology is a growing trend in the real estate industry. More property developers are willing to adopt new, innovative building technologies, such as touch-free electronic devices and motion detection lighting. The costs of adopting technology continues to be expensive and will increase as the features become more complicated.
Infrastructure underinvestment continues to increase the risks of constructing buildings and increase delays in finishing projects on time. The American Society of Civil Engineers (ASCE) predicts that ongoing underinvestment in infrastructure will add to economic burdens that negatively affect working professionals, families and businesses.
In the complex, modern world, no real estate developer works without facing a host of problems. From worsened climate change to reduced economic funding, developers are more likely to delay or cancel projects than they were several decades ago. They must be prepared for a problem to occur during any step of the process, whether it’s creating a valid contract or scouting for viable land to purchase.
Real estate development is an enticing endeavor for people who want to see significant gains on their investments. The market is one of the most dynamic, though, so you should take each step with careful consideration and due diligence. As you begin in real estate development, here are five things to always keep in mind.
Be Conservative While Taking Risks
If you start out in real estate development investing a huge amount of capital and overnight success, plan to be disappointed. This is a highly competitive and complex environment, so it is best to take risks while remaining conservative with your expectations. Two distinctions to make in the beginning is that between discipline and differentiation. Discipline refers to projections about how much you plan to make each time you sell or lease a space. Differentiation is what sets you apart from the competition. Balance the two just right, and you have a winning combination.
Know the Value of Reliable Data
As technology has evolved in recent decades, we now have access to almost any type of information. Before you decide to take on a real estate development project, research, and then research again. Use reliable sources, and compare the findings across multiple platforms. Always look for data that contradicts what the masses are saying. There may be some insight that saves you time and effort.
Have the Right Team
When you are putting together a team to make your dreams of real estate development come true, choose the right people. This means always choosing the best people in the business, even if you have to pay more. Your team is what will carry your projects through from start to finish and help you build lasting relationships that add value now and in the future.
Learn the Laws
You are certain to have times when you will need to work with local communities, organizations, and governments to secure access to water, land, and even air. Understanding the laws ahead of time makes you prepared for any barriers and challenges that may arise. You will need to know about environmental impact protections and zoning. In large metropolitan areas, air rights are a current consideration, but the advent of drones will make this issue much more common in real estate development.
The impact of disruptions from 2020 are far-reaching, and the housing market is no exception. This leaves many people wondering if 2021 and beyond will be enough time to stabilize the economy and real estate investing. Here are four trends that are emerging in the housing market so far this year.
Housing Prices in Metro Regions
The median price of residential homes in metro areas saw a decline in the first part of 2021, making this a great time for those who are looking to buy. The trend is especially noticeable in metro areas of the country. There in also an increase in the numbers for people who are selling homes for the first time, so inventory may increase, which will also decrease median prices as sellers need to remain competitive. Although median housing prices are higher than the same time last year, the increase is much slower. Overall, housing prices have increased by nearly 13%, but less than 4% in metropolitan areas.
Housing Sales Compared to 2020
Even with the economic challenges of 2020, more people are buying homes in 2021. Sales for existing homes increased by just over 1%, most likely due to the higher levels of inventory and competitive median housing prices. Homes that are on the market are also within an affordable price range for most buyers this year. First-time buyers only represent about 30% of home buyers, and this may be an indication of people downsizing or relocating. The southern part of the country is seeing the highest percent of home sales, followed by the Midwest, west, and northeast.
As of June 2021, new home construction continues to decline, and it is at an all-time low as of June 2021. Many predictions indicated that new construction would increase around the middle of 2021, but those predictions have not materialized. Instead, pricing for new homes have made them unrealistic for many buyers. When combined with the inventory and competitive pricing of existing homes, buyers are choosing to get the most house they can for their budgets.
Homebuyers are making purchases much quicker compared to last year. The increase in people looking to buy may influence the decision to jump on a good deal rather than wait. On average, listings are for sale just over one month before they are under contract and off the market. Analysis of buyer behavior and the real estate market indicate that the time on market will continue to decrease.