Hello everyone
and welcome to another episode of Selling Greenville
your favorite real estate podcast here in Greenville
South Carolina I'm your host as always
Stan McCune, Realtor, right here in Greenville
South Carolina
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today, we need to talk about a very important topic
the government shutdown
and you know one thing
it's a little bit of a misnomer
is that the government doesn't like actually shut down
it's just it's kind of like a big
big scale back right
and so if it were like a true
like just full blown shut down
that would be a big problem for real estate
with it being a scaled back more
you know kind of shut down
it is still a problem for real estate
and I just realized speaking of problems well
I don't have my phone in here
and I need to put my computer on do not disturb
there we go I just did that
it would be a big problem for real estate
if the government fully shut down
thankfully it doesn't
thankfully it only does this kind of
you know partial
partial kind of shut down
but there are still effects on real estate
here in Greenville here outside of Greenville
we need to talk about
what a government shutdown does to real estate
this is it
it's been a really a minute since we've had like a big
long government shutdown
but there's a possibility that this shutdown that we're
we're in the middle of right
and I'm recording this October 7th
this could go on for another week
two three weeks
like there's kind of a stalemate
and honestly you know
I'm not gonna get too political here
but there are advantages
for both parties to drag this out
there are reasons why both parties
would potentially want to drag this out
and not immediately resolve the shutdown
and that's really really bad right
that just means
that it's going to take longer than normal
and so we just have to deal with it
but what I'm gonna be doing is
I'm going to be reading a
a a list of
of stuff from the National Association of Realtors
of impacts on
real estate that the government shutdown has
and I'll give you my thoughts on it
so we're
I'm just gonna start right at the top with the EPA
the Environmental Protection Agency
under EPA shutdown plan
most employees will be furloughed
this will affect various regulatory programs
and compliance activities
such as wetlands determinations under the 4 0
4 program and enforcement of the lead paint disclosure
renovation repair and painting programs alright
what does all this mean well
wetlands determinations
that should not have a huge effect here in Greenville
that's not really a a major part of our market here
now that's a big deal in other parts of South Carolina
but and it's not that we don't have wetlands
here in Greenville
it's just that's not something that's
that's affecting a lot of real estate transactions
right now the enforcement of lead paint disclosure
renovation repair and painting programs also
I would say not a huge impact in Greenville
now it's not because we don't have homes that
that have
that that were built around the time or before
when lead paint was being used
that's not what I'm saying
here's the thing so
we've got those older homes
that were built around the time that
that lead paint was still being used
anytime I show one of these homes
they've had so many layers of paint on them
that it's
virtually impossible to get a positive test for lead
now where you can run into lead paint issues is
let's say that you start to demo walls that have
you know old lead paint in them
that can become an issue but again
just don't eat the lead paint right
it's not like
other things where it's like if you ingest it
you know
in a variety of ways
it's not like if you cut yourself with it
you're gonna get in in big trouble
I mean I'm not a doctor or anything like that
so I don't know all the ramifications there
but the whole problem with lead was that basically
little children were eating it right
that was that was the problem with the lead paint
they'll take the little paint chips
put them in their mouth and eat them
and generally speaking
when you're in a construction crew
that's not happening and again if
if the walls have been painted over 20
times you know
for a home that was built in the 50s
that there are layers of paint that don't have lead in them
right over the course of that many years
that's just something to consider
I've never
in my entire career had someone test for lead paint
I've never had lead paint
become material to a transaction
so I don't think that's a huge deal
HUD programs HUD
this is the next one HUD
has a contingency plan that keeps
many housing programs alive
though often in a reduced capacity
while others face serious disruption
The Federal Housing Administration FHA for short
for example will continue to endorse
new single family mortgage loans
except for certain types such as H
E C m's in Title 1
which I'm not gonna get into
thereby keeping its systems running
but many actions needing staff input
such as processing certain types of condominium
project approvals are suspended
there are there are other things in here
so for instance, well
I actually, I'm just gonna
I'm gonna read a little bit more at the same time
essential FHA operations, including paying claims
servicing mortgages
loss mitigation
and managing foreclosed properties move forward
often via contractors rather than employees
importantly
borrowers may turn to private flood insurance
if the National Flood Insurance Program lapses
during the shutdown we'll talk about that in a second
m so long story short
HUD generally speaking is going to keep moving forward
and that's important right
that's a that's a huge part of it
they have their fingers all over the real
as does FHA
as does Fannie Mae
as does Freddie Mac who will get to here in a second
the important thing is again
we mentioned condominium project approvals again
my listeners probably not too many of them
are gonna be affected by that
but anything needing staff input
is potentially at risk here
and so if you have some kind of a unique thing
where you might have to get HUD
or FHA staff on the phone
not something that I'm typically having to do
but something lenders might have to do or perhaps
borrowers might have to do it
you could experience slowdowns when it comes to that
government sponsored enterprises
during previous shutdowns
Fannie Mae and Freddie Mac have continued
normal operations
since they are not reliant on appropriated funds
there are four key areas of consideration
we've got verification of employment okay
for home buyers employed by the federal government
both Fanny and Freddie Mac
allow for verification of employment to continue
after closing
but prior to delivery of the loan alright
when you hear delivery of the loan okay
here's an important detail
you got a lender
they are typically going to sell the mortgage
that they underwrite okay
so you close on a mortgage
that mortgage gets sold
usually it's changing hands
with Fannie Mae and Freddie Mac on some level
that's what they call delivery of the loan
and so if you're a federal employee
you've got to make sure that all
that this is all gonna work out
and you might have a lender
that is kind of hesitant right
because they don't want once they close on your loan
they don't want to have issues with
selling that loan on the secondary market
to Fanny and Freddy
and so that's a consideration there that they may say
hey we need more clarity on
on this shutdown before we close
on this tax transcripts here's the next part of this
of the government sponsored enterprises section
Freddie Mac requires all borrowers to sign a
4506T45O6T which is a request of
transcript of tax return request form prior to close
but the request does not have to be processed
prior to close Fannie Mae requires the same
unless the borrower's income
can be verified through Fannie Mae's proprietary
Desktop Underwriter Verification system
in which case no 45 o six t is required
and then it also says during past government shutdowns
the IRS suspended the issuance
of tax return transcripts
okay what does all this mean again
this could cause a delay
if you have a loan that requires a tax transcript
you are likely to face a delay on your closing and this
this impacts a lot more than just residential buyers
this impacts commercial transactions quite a bit
particularly on investors
frequently there's requests for these tax transcripts
and so if the IRS is not doing that
that's going to cause a delay
that's something to be aware of
verification of Social Security numbers
sometimes Social Security numbers are disputed
must be verified Fannie Mae
allowed lenders to verify the numbers
prior to delivery of the 2018 shut down
as precaution but did not allow delivery
if the number was not confirmed
Freddie Mac does not require
verification of Social Security number
so again you might run into a situation
where you need a Social Security number to be verified
and you might not be able to get that
now again this is a really
really niche case if it happens
it's gonna cause a delay
proof of flood insurance coverage application both fan
and Freddy
require a completed application for flood insurance
and a copy of a check for the first premium
or the settlement on the settlement statement
reflecting the payment of the initial premium
or the assignment of an existing policy
from the old owner
we'll get to flood insurance here in a second
because that could be a problem for some people
let's see here IRS
can also cause problems well
they're always they're always causing problems
but long story short
during the 2018 closure the
roughly 12% of employees
who were required to report to work
could open mail
only in search of checks payable to the government
and were not allowed to answer taxpayer phone calls
issue tax refunds
release liens and levies or perform most other tax
taxpayer services now here's something interesting
I've got a little bit of inside information here
and that's
because my accountant took a really long time
extending
my tax return and all of that
and we just completed the tax returns a few weeks ago
I just got my tax refund from the IRS
and yes I did in fact get a refund
I just got that a few days ago during the shutdown
so apparently they are still issuing tax refunds
perhaps the IRS is doing a little bit more than normal
right now it's hard to say
if you're dependent on the IRS for real estate closing
again that's another pressure point
where there may be a delay
National Flood Insurance Program
during a lapse of authority
the NFIP may not sell new
or renewal flood insurance policies
existing NFIP and
FIP policies will remain in effect
until their expiration date
and claims will continue to be paid
until funds run out the NFIP policies may be assigned
from seller to buyer during a lapse
and most lending regulators have issued guidance
providing flexibility
private market flood insurance is also an option
this again impacts coastal areas and
and other areas of
of South Carolina more so than the upstate
but we do have floodplains
here in the upstate of South Carolina
and if you are purchasing a home in a floodplain
this is potentially a problem right
you don't have access to the national
flood insurance program
and you may need to look into this idea of
of an NFIP policy
being assigned from the seller to buyer
during this lapse period
I've never heard of that happening
but it seems like that is an option for some people
if they are purchasing a home in a floodplain
cause you're not gonna get a new policy and of course
it references a private market
flood insurance is also an option
either way it's a good idea to contact a
an actual personal lines
homeowners insurance company
or insurance broker to discuss flood insurance right
before you ever get a policy
don't just go to FEMA's website and do it all there
I always recommend
talk to an actual insurance person first
and go that route
rural housing program
some of you know about the USDA loans is a 0%
often times zero PMI loan program designed to
to stimulate rural areas it's only in specific areas
you can't get it everywhere
has to be somewhat rural
and USDA will not issue new direct loans
or guaranteed loans and scheduled direct loans
closings will not take place
this is a this is a big one right
this is
a lot of these other ones we've been talking about well
there's some workarounds or
you know
maybe your closing will just be a little bit delayed
this one's not a maybe
this is a guarantee
if you are purchasing a home with a USDA loan
you will not be able to close on it during
the government shutdown okay
and so it
it continues to say pending
conditional commitments for guaranteed loans
will be reviewed and if possible
USDA may issue the loan note guarantee
guaranteed loan
closings without a previously issued guaranteed
may still proceed but only at the lender's risk
listen I
I don't see lenders taking those risks right now
lenders are very risk averse in this environment
I would plan I mean
really if you're getting a USDA loan
and you've not heard yet from your lender as to like
what's happening you need to call that lender right now
if you're a realtor
who has a client getting a USDA loan
you're listening to the show
pause the show and call the lender to see hey
is there an issue here with USDA
with us actually closing on time
now continue to say
disbursements on existing construction loans
may continue when necessary
to protect USDA's property interests
yeah naturally
right
and I'm not gonna get into
to all that with the construction loan aspect of it
but USDA is gonna do what they need to do to
protect themselves
department of VA
Veterans Affairs will continue to guarantee home loans
during the government shutdown
and lenders may keep processing applications however
some VA staff and support functions may be reduced
which may slow down approvals
appraisals and certificate of eligibility requests
veterans seeking a new loan
or refinance should check with their lender
for updated processing times
during an extended shutdown
listen we already know that
VA loans are a little bit more involved
and that's not a problem like it's
they can still be closed
about the same speed as an FHA loan
more often than not a good VA lender can do it
but now we're throwing this government shutdown
thing into the mix and
and I think you just have to prepare
if you're trying to buy a home with a VA loan
if you go under contract during this government
and shut down put out that closing date
you got to put it out give yourself plenty of time
give yourself maybe 45 days just to be absolutely
well I mean 45 days isn't a guarantee
but once you start getting above 45
most sellers don't want to even entertain it
so that's probably the longest that you can do
maybe have a conversation with the seller
if the home's been on the market for a while
perhaps you can get by with a with doing 60 days
remember most contracts are structured
that the closing date is on or before that date
so you can do 60 days
but as soon as the government reopens or whatever
or if the or if the government shutdown not a problem
you can certainly close sooner than that
let's see here visa programs EB five and H
to be not gonna get into the weeds on all of this
but just understand the processing of labor condition
applications for various work visa
including the H2B visa will be shut down
so if you need a visa in order to purchase a home
you could be impacted by these things
Small Business Administration
the SBA will not process new loans
or approve routine small business loans
including the CDC 5 0
4 loan program and the 7A loan program
however
the agency will continue to close previously approved
CDC 5 0
4 loans and carry out limited loan servicing
liquidation activities
so if you're depending on the SBA some kind of SBA loan
be aware there could be some issues with that
and I'll just end with this
which is the final part of
of this whole thing
from the National Association of Realtors
in a previous near
survey of members
on the impact of government shutdowns
on their business 75% had no impact on their contract
signings or closings however
11% did report an impact on current clients
and 11% on potential clients
so 75% of real estate transactions for the most part
are not affected that
that number
probably the way I worded that isn't accurate
because they
that was a survey of members
so 75% of Realtors were not affected
also 75% of Realtors
have like one transaction or fewer per year
so it's hard to say exactly
you know how meaningful that number is
but the point is that
most people are not gonna be impact
impacted by the government shutdown
but in some of these niche cases
they could be
particularly when you're talking about the the
the flood insurance things
getting those tax transcripts
the USDA loans and
and some of these things that require
you know help from
from VA staff or help from FHA staff
things of that nature again
we start getting into some of these niche cases
how likely is it
that's super likely in in a lot of these instances
but real estate is a Murphy's Law industry
if it can happen it will happen
and you can pretty much guarantee that
there are realtors
right now that are being affected by it
thankfully it hasn't affected me yet
knock on wood whatever
I hope that that continues
but more information you have
the better but this is a pretty exhaustive list
if it wasn't on this list
then it's a really
really niche case that would affect you
so don't freak out government shutdown
it too shall pass will be next week
will be the week after will be the week after that
who knows but it'll pass eventually
and then we'll be back to normal
hopefully
we get the flood insurance program back up and running
that's the big one right
that's really the out of all
all of these
that's the one that directly impacts people the most
in my opinion
and that's something we have to fight for every year
because the flood insurance program expires every year
so we're constantly
the National Association of Realtors
constantly having to advocate to Congress that hey
flood insurance really important right
some people
their homes would immediately lose value if the
National Flood Insurance Program ceased to exist
now you might not think
that the federal government should be in the issue
it should be in the
in the business of issuing and
and regulating flood insurance
and you might have a very good argument for that
but the problem is that
when it just goes away overnight
you know the
the private industry the private insurance market
can't immediately fill that void
and that void could take
months or years and
and then again you might have people that
that had homes in flood plains that now the
the private market has
taken over
perhaps insurance cost a lot more as a result of that
it could be less but I'm just giving out scenarios here
it could be a lot more
that could then devalue a person's home
so there's a lot that could go wrong here
if for instance
flood insurance were to be dismantled long term
thankfully that hasn't happened
the flood insurance program did get into the one big
beautiful Bill that Trump signed earlier this year
but now we have this government shutdown
destroying all these monkey wrenches into it
and here we are
we just got to ride it out
but hopefully no one will be severely impacted
so far none of my clients have been impacted
hopefully none of you will be impacted either
if you have any questions on that
let me know my contact information is in the show notes
if you need to reach out to me
for any of your real estate needs
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