Euclid City Council is considering a new ordinance that would eliminate the escrow component for the city’s point of sale policy, making it a little easier on the wallets of potential homeowners.
The Business Development, City Planning, and Housing Committee approved a motion referring the ordinance to the full city council, with a recommendation to approve.
Currently, Euclid requires an interior and exterior point of sale inspections with fees ranging between $225 and $295 and an escrow of 50% of the estimated costs of repair.
These kinds of fees are troublesome for Millennials, many of whom make up the homebuying market and who are often dealing with student loan debt as they look to purchase their first home.
“If you’re paying off student loan debt, like so many of us are… having to come up with additional funds to be placed in escrow can be a real deterrent to some home buyers.”
The Akron Cleveland Association of REALTORS® (ACAR) has been vocal in their support of not only this new ordinance but also systematic exterior-only inspections of all homes in a jurisdiction, not just those that may be for sale or for rent.
ACAR suggests that cities without a point of sale inspection policy often have a more active real estate market.
“We appreciate the efforts of Mayor (Kirsten Holzheimer) Gail and this committee for considering updates to the City’s point of sale inspection policy, in particular the escrow component,” Jaime McMillen, ACAR’s Vice President of Government Affairs told the committee at a recent meeting.
“When you think about young adults looking for their first home, Euclid fits the bill. Fifty percent of home buyers purchased a home in a suburban area last year, and 87% bought a single-family home.
“However, if you’re paying off student loan debt, like so many of us are, having funds for a down payment, anticipated repairs, associated costs with getting your own private inspection, closing costs, and then having to come up with additional funds to be placed in escrow can be a real deterrent to some home buyers.”
A study conducted by the National Association of REALTORS® (NAR) titled the 2017 Student Loan Debt & Housing Report indicated that 27 percent of homebuyers reported having student loan debt with the typical amount of debt in the $25,000 range, with that percentage increasing to 40 percent when looking solely at first-time homebuyers.
Additionally, 83 percent of non-homeowners, most of whom were renting a property, indicated that student loan debt was a primary reason why they’ve put off buying a home. That delay was a median of seven years, according to the study.
A second NAR study, the 2020 Down Payment Expectations and Hurdles to Homeownership report, indicated that 26 percent of first-time homebuyers said that saving for the down payment was the hardest part of the homebuying process.
In the last five years, the top four reasons for being unable to save for that down payment have been, in order, student loan debt, credit card debt, car loans, and rising rent.
Not surprisingly, millennials, who make up the 26-40-year-old demographic, were most likely to report student loan debt as a major factor. This is important because millennials make up the largest share of home buyers (38 percent) and 86 percent of younger millennials and 52 percent of older millennials were first-time homebuyers, more than any other demographic group based on age.
It is also important to note that homeownership is still a priority for many. 78% of non-owners believe homeownership is a good financial decision. Additionally, 81% of non-owners want to own a home in the future.
By eliminating the escrow requirement, Euclid will make buying a home in the city more affordable for potential buyers.