👋 Happy Friday! We’re thankful for our readers, clients, beneficiaries, vendors, crew members, families, friends, pets, and everyone who gives us a reason to get out of bed daily. We’ll be taking off next week to celebrate 🩃 ThanksgivingÂ đŸ„§Â for all of these things formally, and we wish you all a great Thanksgiving week ahead.

1 big thing: More data breach reports on the horizon

The Federal Trade Commission (FTC) recently amended its Safeguards Rule to require nonbank financial institutions to report data breaches.

Why it matters: The new protocols mean nonbank businesses offering financial services will spend more time understanding, documenting, and reporting data breaches. They may also feel pressured to invest in new security measures and surveillance technologies.

Define “nonbank financial institution”: NBFIs provide services similar to banks but don’t have a banking license. These include:

  • Mortgage brokers

  • Investment advisers

  • Loan or finance companies

  • Payday loan operations

  • Car dealerships

Because NBFIs offer credit, investment, and financing services, they fall under the authority of the Dodd-Frank Act — just like banks.

State of play: Financial institutions were already required to create, execute, and maintain comprehensive security programs to protect and keep their customers’ data confidential. Effective May 13, 2024, NBFIs will have to report data breaches that affect 500 customers or more to the FTC within 30 days.

  • Institutions must report the nature of the breach, the number of consumers affected, consumers at risk, and other information.

Transparency and accountability: Companies entrusted with “sensitive financial information” must be transparent if a customer’s financial information has been compromised, says Samuel Levine, director of FTC’s Bureau of Consumer Protection. The FTC hopes the new requirement will provide further incentive for institutions to keep their customers’ information secure.

Response to the new amendment:

  • Supporters of the new amendment claim it will allow the FTC to enforce better requirements for comprehensive and effective data security measures at financial institutions.

  • Opponents claim it duplicates existing state breach notification laws, which the FTC can access and review.

The bottom line: The new amendment will enable the FTC to track emerging data security threats more comprehensively. But it also means nonbank financial institutions must invest time and resources to comply, including ramping up technology and data security services, which can be costly.

2. The commission lawsuits’ worst case scenario

Individual and class action lawsuits over real estate broker commissions could reshape the industry. REALTORs need to prepare.

What’s happening: Since 2019, homeowners have filed a number of lawsuits against the National Association of Realtors (NAR) and prominent real estate companies like Keller Williams and Re/Max.

  • The complaints take issue with NAR requirements, which they say violate US antitrust laws.

  • One of these requirements, which says listing brokers must offer buyer brokers a commission if they want their properties to appear in the MLS, raises particular ire.

Why it matters: The outcomes of these cases could significantly reshape the real estate industry.

Real estate brokers should be concerned. Many real estate professionals believe these lawsuits could change how agents get paid for sales and, by extension, how brokerage companies and other MLS companies do business.

  • But they’re not: A 2023 survey by RealTrends Broker Pulse discovered that only 3.45% of brokers believed the outcome of these lawsuits was a “challenge or concern,” and around 60% of respondents claimed they were doing nothing to prepare for a worst-case outcome.

To prepare, buyer brokers need to figure out how buyers’ agents will be compensated. Other measures include:

  • Adding buyer representation agreements to their practices and training agents on new compensation procedures. This could mean shoring up a substantial compensation rate if the industry takes a significant hit in total gross revenues.

  • Shoring up core services. But, experts caution, only to a point. Evidence so far suggests the most efficient use of resources could mean moving away from a traditional sales-office culture.

  • Exploring alternative business models. Regardless of the fallout from the lawsuits, recessions are an ever-present danger when it comes to real estate industry commissions.

The bottom line: Given the potential impacts on real estate broker commissions, brokers must take the current spate of lawsuits seriously. Having a plan for the worst-case scenario can ease the transition to a new model — and doesn’t prevent hoping for the best.

3. Catch up fast

  1. Orlando home sales fell 5% from September to October. This is the fifth straight month of falling sales. But the median house price still increased from $370,000.00 to $377,000.00 in that month. Orlando Sentinel

  2. Weekly jobless claims increased by another 13,000, continuing claims rose by 32,000, manufacturing dropped 0.7%, and oil prices dropped by 5% — all signs that the Fed’s higher rates are cooling the economy which should lead to lower inflation. Reuters

  3. The current state of the housing market, state by state. Go Banking Rate

  4. Foreclosure starts are up by 6% since last year, but down 6% from last month. DSNews

  5. Survey of 281 Realtors provides insight on thinking about the commission lawsuits and their fallout. HousingWire

4. Pic of the day

The back of our new offices at night. The parking lot lights were too bright for the neighbors' taste, so we're working on that. Photo: Joe Seagle

We spent this past week moving into and unpacking the new offices.

  • We take up the first floor, which is as large as the entire building we left.

  • This allows us to serve clients and beneficiaries better in the future.

But that wasn’t the highlight of my week. Instead, on Thursday, I had the pleasure of driving an hour to Tavares to appear at a trial where I was named as the defendant.

I’ve written about this in the past, so it’s no secret it was coming. But — for those who missed that story — the short version is that a neighbor sued me individually, alleging that I had killed a tree on his property, causing it to fall.

I hadn’t been to Lake County since 2019, when I took the Christmas lights boat tour in Mount Dora.

  • But that didn’t matter in this case.

  • As the plaintiff stated in the small claims case, “Joe Seagle is the apex of the organization, so he’s to blame for anything that his company did to my tree.”

I had to refrain from grinning, but I found it ironic that he was alleging that I, an officer of a company that is the trustee of a trust that owns the property next door to his, have unfettered power to do anything I want with not only the trust property but also his property. If I only had such infinite powers 
..

But I don’t. Nor do I want them.

I say I had the “pleasure” of sitting through the trial because the trust worked as it should have. I suffered the accusations being hurled at me while our beneficiary was blissfully ignorant of what was happening. I was taking my time and energy to travel the two-hour round trip to sit in a two-hour trial while our beneficiaries could continue their productive day.

The judge dismissed the case with prejudice thanks to the great work of my longtime colleague and our local attorney, Laura Hargove.

I felt bad for the plaintiff to the extent that he lost a large and beautiful tree, but it was never our fault nor our beneficiary’s fault that the tree died. Fortunately, the trust worked, and the plaintiff couldn’t drag our beneficiary through the mud as he took out his anger on me instead.

The bottom line: What a wonderful world.

We hope you found this helpful — any feedback is appreciated and can be shared by hitting reply or using the feedback feature below.

Be on the lookout for our next issue! 👋

  • Our mailing address: PO Box 547945, Orlando, FL 32854-7945

  • Our physical address: 1901 West Colonial Drive, Orlando, FL 32804

Newsletter

January 2024

September 2023

Title

👋 Happy Friday!

Situation Awareness: The 2023 Real Property TRIM notices are flowing into our offices for the properties we hold as trustee. We scan about 150 to 200 a day and upload them to the client portal. We then share them with clients via e-mail from the portal. If you receive an e-mail mentioning “Clio,” please do not ignore it. That is the name of our practice management software that creates the portal to allow you to view the notices we have received. If you have not received your TRIM notice by the second week of September, please get in touch with us at [email protected] to request us to pull a copy from the county appraiser’s office and share it with you.

1 big thing: Inventory is up

Land Trust | Asset Protection

Housing inventory was at its highest level so far this year last week, and it appears it will continue rising at least through September.

Why it matters: Although interest rates have been increasing steadily for over 23 months, they’ve not been cooling inflation in shelter costs (housing). That may be changing.

By the numbers: On Wednesday, the average mortgage rate for a 30-year fixed mortgage was 8.077%.

  • Last year it was 5.87%, and

  • the year before that it was 3.257%.

  • In 2020 on the same date it was 2.99%.

What they’re saying: “Rising rates make more inventory,” according to the “Altos Rule.” This hasn’t panned out over the past year as rates climbed while inventory dwindled to a point 10% lower than last year.

  • This lower inventory raised prices.

  • Couple that with rising interest rates, and housing became more unaffordable.

Yes, but: We’re entering the natural seasonal slowing of home buying when inventory typically rises, peaking the last week of August.

  • Buyers facing higher interest on mortgages are expected to sit on the sidelines longer this year, which will help inventory continue to rise past this final week and into September.

  • The rate at which home sellers are reducing prices is at 35.5% of homes on the market, which will continue to climb through November.

  • This shows that sellers are seeing fewer buyers on average nationwide and are reacting by lowering their prices, with Austin, Texas, seeing the most price reductions of any major city.

  • In Orlando, inventory of homes for sale jumped 19.9% between June and July, as home sales dropped 8.7%. Expect those numbers to continue to increase through September as the median price continues to fall.

The bottom line: Rising interest rates coupled with seasonally slowing sales may finally have the intended effect of lowering housing price inflation. This will also help lower the overall inflation rate, giving the Fed room to pivot on rates in 2024. However, if the Fed votes to increase rates again at its next meeting, it could turn this soft landing into more of a nosedive.

2. Novation agreements are not a thing

Land Trust | Asset Protection

“Gurus” are pushing “novation agreements” as the latest rage in real estate investing.

Why it matters: They’re alleging that such agreements can be used to engineer a transaction to allow the investor to list the property on MLS before the investor owns it.

Black’s Law Dictionary provides one definition of “Novation” as:

A contract that (1) immediately discharges either a previous contractual duty or a duty to make compensation, (2) creates a new contractual duty, and (3) includes as a party one who neither owed the previous duty nor was entitled to its performance. ‱ A novation rests on a contract, which must be clearly shown. It cannot be made binding by later acquiescence or ratification without a new consideration or the existence of facts that constitute an estoppel. If the novation involves the original debtor’s discharge, it must be contemporaneous with and must result from the consummation of an arrangement with the new debtor. — Also termed substituted agreement

Historically, if a novation occurred, it meant that a borrower on a note was removed and replaced with a different borrower. The new borrower (obligor) would sign a renewal note or other contract, and the lender would agree to release the original borrower.

  • Real estate attorneys prefer to avoid novations because they are considered to be new agreements that require their own consideration to be enforceable.

  • They start a new relationship between new parties, which raises thorny legal issues if the previous parties have been performing under the replaced agreement.

  • Claims can arise if third parties have been part of the original agreement that is now replaced.

Having reviewed some of these form “novation agreements,” they read like assignments of contract where the original buyer is released from liability upon assignment.

  • In most cases, the investor-buyer’s name is replaced with the new end-buyer’s name, and the investor-buyer is released from the original contract. The end-buyer pays the investor-buyer for this substitution.

  • That doesn’t create any equitable interest in the real estate that is the contract’s subject, and

  • That doesn’t give the investor-substituted party any right to list the property they don’t own yet.

  • It creates a new contract between the new buyer and seller.

  • So long as the seller agrees, it’s smooth.

  • But it’s an opportunity for a seller to sell the property to a buyer willing to pay more since the existing contract is voided once a new buyer is substituted for the existing one.

The bottom line: REALTORs who are presented with novation agreements could find themselves in hot water with their local board if they rely on them to make a listing for a non-owner of the property. Investors would be better served to stick with contract assignments.

3. Catch up fast

  1. Desantis used his line-item veto to eliminate $30 million in energy-saving programs. It will cost lower- and middle-income Floridians $346 million in lost federal rebates and other programs that could be used to upgrade home air conditioning systems, wiring, windows, water heaters, and roofs. But the legislature can try again next year. Orlando Sentinel

  2. Florida and nine other states have sued to prevent the National Flood Insurance Program from implementing its new Risk Rating 2.0 for flood-prone properties that must obtain flood insurance. The federal government is fighting back, saying the states have no standing. Creative Loafing – Tampa Bay

  3. Tiny homes and Golden Girls-style multi-generational homes are becoming popular ways for homebuyers to afford housing. Fox 13 – Tampa Bay

  4. Due to new condominium inspection regulations enacted after the Champlain Towers tragedy in South Florida, Bayfront Tower, a tony high-rise condo in St. Pete Beach, faces between $35 million and $45 million in required repairs. Owners will pay special assessments to cover them. Tampa Bay Times

  5. The largest U.S. city with the lowest rate of inflation is Minneapolis. thanks to its residential zoning policies. Bigger Pockets

  6. The age of first-time home buyers is the highest it’s ever been at 36 years old. Scripps News via MSN Money

  7. First-time homebuyers must earn 13% more than they did last year to afford their first home. The Title Report

4. Pic of the day

Land Trust | Asset Protection
Railroad spur leading west out of Richmond, VA, on the far side of the James River. Photo: JES

Tomorrow is NationalÂ đŸ‘©Â Women’s 🟰 Equality Day which marks the 123rd anniversary of passage of the 19th Amendment, giving women the right to vote.

The movement for the 19th Amendment started 183 years ago, in 1840, when several women were denied access to the floor of the World Anti-Slavery Convention in London.

  • This set in motion planning for the first Women’s Rights Convention in 1848.

  • In 1849, Susan B. Anthony and Elizabeth Cady Stanton joined together to create the National Woman Suffrage Association.

  • It took 34 years of lobbying, protesting, and admitting new states to the Union before the 19th Amendment was finally passed.

The League of Women Voters was also established in 1920, the same year the 19th Amendment passed, and they’ve been a force for providing voting information and education ever since.

We hope you found this helpful — any feedback is appreciated and can be shared by hitting reply or using the feedback feature below.

Be on the lookout for our next issue! 👋

Go to Top