Category: General

Time for a New York-Style Housing Fix

Street signs for W 125 st.

 

Previously, I’ve written about a man who works in our office who lived in New York City back in the late ‘80s and early ‘90s – let me assure you that while that does seem like a very long time ago, it’s not nearly as far back as when the wheel was invented and humankind learned to harness the power of fire. If you’ve been to New York City recently and blissfully walked around Harlem to get chicken and waffles at Sylvia’s on Malcolm X Boulevard between 126th and 127th Streets or stopped in at Keybar on 13th Street between First Avenue and Avenue A to wedge yourself into a cozy corner next to their notable fireplace, you wouldn’t get a sense that these areas were once . . . not as welcoming and glitzy as you now see them. Our office mate has told some fairly interesting stories of living in those and other areas of New York City that give a much different sense.

In the late ‘80s/early ‘90s, no matter how many great things you heard about Sylvia’s food, 127th Street and Malcolm X Boulevard (back then, it was Lenox Avenue) wasn’t a place you popped up to for Sunday brunch – it was an area you didn’t visit unless you had . . . official business. At that same time, between 14th Street to the north and Houston (pronounced HOW-STUN) to the south and east of First Avenue – known as Alphabet City (still is) – that was an area full of very hard-living folks who would sell their right arm (or yours, it didn’t matter to them) to get their next fix, and I’m not talking about an appliance repair. The Lower East Side (of which Alphabet City is a part) was full of tenements and government projects that tucked itself into the shadows of the bright and shiny skyscrapers that surrounded it – A LOT of bad stuff happened in the darkness of those shadows.

Anytime he tells one of his New York stories, they all seem to end with him saying, “Back when I lived there, I NEVER would have thought many of those areas would be safe to go back to and show my family.” And whenever he says that, he gets a bit of a far-off gaze fixed on his face: one that could mean he’s momentarily transported himself back to an earlier time (or he needs to get back on his medications).

Between the late ‘80s and today, New York City has continued to grow, population wise. Sure, the city has improved and become safer, but there were many years before those improvements and that safety came about, and the city’s population STILL grew. There was something that kept them there and attracted more people.

Recently, I read an article that said an end to the housing shortage is in sight. Granted, the article went on to say that it’s still probably about eighteen months out, but it does cite a number of reasons for being optimistic. There are many of you who have been saddened or depressed because you feel you’ve been priced out of the market as a result of this housing shortage. Well, now is not the time to give up. In fact, NOW is the time to formulate, implement, and execute a plan that will enable you to seize the moment when the right house at the right price becomes available. There are many things that you’ll want to look at like your current spending habits versus your current saving habits (or lack thereof) and how much debt you currently hold (credit card balances, car payments, student loans, etc.), just to name two. If you wait until the housing shortage abates before you work on a game plan, you’ll be even further behind the eight ball.

If you’re a real estate agent, may I suggest seeking out and marketing to folks who need to do a little work in anticipation of the housing shortage letting up? You’ll fill a great pipeline that will be a constant source of leads as conditions continue to improve inventory availability. If you’re someone who feels like you’ve been forced on the sidelines, get with a lender TODAY and have them help you formulate that plan because when you’ve found the right house at the right price, you’re going to want to have enough for a down payment – relying on the option of selling your right arm isn’t wise.

Size Can Be Deceiving

On a recent episode of a podcast I follow (I won’t tell you which one in case it would lower your opinion of me – if that’s even possible), the host was chatting away with the show’s supporting cast, and he made a comment about cars that struck me: the Ferrari that Tom Selleck’s character (and mustache) drove in the television series Magnum, P.I. takes longer to go from 0-60 than the latest model of the Mini Cooper S. They thought he was pulling their legs, so one of his staff Googled the info while the host nattered on about some other things and quickly came back with confirmation that the 1983 Ferrari 308 GT goes from 0-60 mph in 6.9 seconds while the 2017 Mini Cooper S can do it in 5.3 seconds. Get out of town!

The host of this podcast is a huge car aficionado (although that’s not the theme of his podcast), so he obviously knows his stuff. However, I’d be willing to bet if you walked up to random people on the street and asked them to place a small wager on which of the two cars would win in a drag race (1,000 feet), more than the majority would place their money on the sleek and sexy Ferrari 308 GT. It looks like it eats Mini Coopers for breakfast, right?

With that little lesson planted firmly in your minds, I’m sure you can see where I’m going with this, but since I love to state the obvious, I’ll go ahead and say it. Isn’t that EXACTLY what so many people do when it comes time to purchase a house: they let their preconceived notions guide them in their decision-making process, and quite often, that costs them money (and/or a great deal of time). I can hear some of you now, though, protesting, “Not me! I do a lot of research myself and make sure I know all my options before I make a big decision like a mortgage.” I’m not looking to pick a fight, but I’m going to call bull on that for most people.

The reality is that the “research” most people conduct covers one subject, and one subject only: can I afford to buy a house? Now, that’s the most fundamental subject you SHOULD research, and one that you should have down cold before you borrow a large chunk of money over a long period of time. And once that research is complete, you toddle off to find a company that will loan you that money. All done, right?

A mortgage lender worth a hoot (yes, I said “hoot”) isn’t going to let you walk into her office and start applying for a mortgage. What do you mean? Isn’t it sort of hard for a lender to make any money if he’s keeping borrowers from applying for a mortgage? Calm down, I’m getting to that. The hoot-worthy (you’re going to start using that term, I know it) loan originator SHOULD ask a few questions like what are your short-term and long-term goals with this property, and how do those goals play into your other goals with your family, career, etc. The answers to those questions should prompt new questions that start off with “Have you considered . . . ?” As an example, a little over a year ago, we had a young single guy come to us, and one of our LOs (all of our LOs are hoot-worthy, of course) asked those questions. Because of those questions, the young man went from his preconceived notion of a single-family residence to purchasing a duplex. He lived in the duplex for a year, rented out the other side, had the tenants basically paying his mortgage the whole time, and has now moved out (while keeping the duplex as a rental – both sides of it) and purchased a single-family residence for himself. All of this happened because we asked some questions and listened.

A duplex, of course, isn’t nearly as glamorous as a house, just as a Mini Cooper S isn’t going to turn as many heads as a Ferrari 308 GT. However, when you’ve TRULY done your research (assisted by someone worth a hoot), you’re going to reach your real estate goal a lot faster by picking the right vehicle (and you can still sport the ‘80s mustache regardless of what you choose).

From the Jersey Shore: an Olympic Lesson

statue of Olympic symbol 

There’s an old saying: “A bird in the hand is worth two in the bush.” Personally, if I’m being honest, I believe the bird in the hand is worth a lot more than the two in the bush because, let’s be honest, we have no idea what those birds are doing in the bush and whether they’ve been taking care of themselves (working out and eating a healthy diet v. binge watching “Jersey Shore” and eating gluten). I’ll just add this to the old saying: “But one that’s been plucked, roasted, and served up on a silver platter is worth the most.”

There’s an old saying: “A bird in the hand is worth two in the bush.” Personally, if I’m being honest, I believe the bird in the hand is worth a lot more than the two in the bush because, let’s be honest, we have no idea what those birds are doing in the bush and whether they’ve been taking care of themselves (working out and eating a healthy diet v. binge watching “Jersey Shore” and eating gluten). I’ll just add this to the old saying: “But one that’s been plucked, roasted, and served up on a silver platter is worth the most.”

When submitting an offer on a house, there are generally three types of offers:
1. Based on a pre-qualification (two in the bush)
2. Cash (bird in the hand)
3. Based on a qualified approval (plucked, roasted, and served)
Let me describe how the seller sees each type of offer (using “Jersey Shore” as my backdrop):
1. Based on a pre-qualification: the buyer is basically saying, “C’mon. You can trust me. I’m good for it.”
2. Cash: the buyer is saying, “Tree hunnerd is too high, you know. I got two-fiddy right heah, right now. Let’s doooo this!”
3. Based on a qualified approval: “Here’s a cashier’s check for your asking price.”

Allow me explain and define a Qualified Approval. Underwriting a home loan is made up of two major parts: the home and the borrower(s). Most people overestimate the amount of information needed regarding the “home” portion. In reality, all that’s required is Title Work, an Appraisal, an Inspection, and a Contract – very minimal but very important. However, those are all things that have to be done with limited involvement from the borrower.

The “borrower” portion can be complicated, taking Underwriters down a road full of twists and turns, which translates into time. We are required to verify current income, job history, credit scores, any negative credit history, rent history, large deposits, and the list goes on. By doing all of this up front to obtain a Qualified Approval, we can issue you an “all clear” to show the potential Seller that you, the Borrower, are fully underwritten and ready to purchase their home – this gets your home loan 85% complete before you even start looking for and finding the house of your dreams.

Going the Qualified Approval route is like Usain Bolt’s journey to his first gold medal. The actual race that won him that medal sped by in mere seconds, but he spent THOUSANDS OF HOURS preparing for the moment he would have his chance to run THAT ONE RACE. It paid off, right? THAT is the essence of a Qualified Approval. Getting a pre-qualification is like starting the race with your eye on the prize and being held up in the middle while the officials decide if you’re qualified – and you’re forced to watch someone else claim what you’ve wanted for so long. At that point, the only bird you’re eating is crow. Ouch!

We Salute You

In 1921, an unknown World War I American soldier was buried in Arlington National Cemetery on a hillside overlooking the Potomac River, and this became the focal point of reverence for America’s veterans. Similar ceremonies occurred earlier in England and France, where an unknown soldier was buried in each nation’s highest place of honor: in England, Westminster Abbey; in France, the Arc de Triomphe. These memorial gestures all took place on November 11 in universal recognition of the celebrated ending of World War I fighting at 11 a.m., November 11, 1918 (the 11th hour of the 11th day of the 11th month). The day became known as Armistice Day. In 1954, to honor ALL veterans, President Eisenhower signed a bill proclaiming November 11 as Veterans Day. While many people don’t know the origins of Veterans Day, there are as many people – if not more – who have a lot of misconceptions about a VA Loan. Allow me to highlight and correct some of these myths:

Myth #1: VA Loans are not a great option for a buyer.
Ha! Not only can you borrow over $400K with no down payment and no private mortgage insurance, VA Loans have a higher allowable debt-to-income ratio than many other products!

Myth #2: It’s a “one and done” product
Double ha! While there are some restrictions, you can use your VA Loan eligibility as often as you wish – it’s even possible to have more than one active VA Loan at the same time. Also, if you’ve lost a VA Loan to foreclosure in the past, that doesn’t mean you’re no longer eligible.

Myth #3: VA Loans have slow turn times, too much red tape
You’re KILLING me here! VA Loans can close just as quickly as other products. Now, in the past, every VA Loan had to be reviewed and approved by the Veterans Administration, and they had a lot on their plate – but that was YEARS ago. Get with the times!

Myth #4: There’s no such thing as a Jumbo VA Loan
Wrong AGAIN! In cases when the loan amount is more than $417K, all the borrower needs to do is come up with 25% of the difference as a down payment. For example, if the loan amount were $517K, the borrower would only have to come up with 25% of the $100K difference. Quick math: $25,000 (the down payment needed) is only 4.84% of $517K. On a conventional purchase of $517K requiring a 20% down payment, that would require the buyer to come up with $103,400. Wow!

Let me throw out just a handful of things to consider – things that many agents and homebuyers alike either don’t know or have forgotten: even a low credit score can qualify a borrower for excellent rates and terms; bankruptcies and foreclosures are treated much more leniently with this product; and since private mortgage insurance isn’t required, the buyer can afford more in her/his monthly payment.

While we can ALWAYS do more to thank the women and men who selflessly serve in the armed forces, the least we can do is make sure they know what they’ve earned and deserve! THANK YOU, Veterans!

Moneyball

A baseball laying on top of turf.

Back when the 2017 baseball season started (what seemed like twelve years ago to many), the Los Angeles Dodgers had an overall payroll for their roster totaling over $240 million – that’s a lot of money for men who wear tights, eyeliner, and play a game for a living. The next highest payroll was the New York Yankees at a little north of $201 million. Facing the Dodgers currently in the World Series are the Houston Astros, and they started the season with a payroll of approximately $124 million. Just for comparison’s sake, the Astros were #18 on the payroll list, meaning that there were sixteen teams beside the Dodgers who spent more on their rosters and did NOT make it to the Big Game (actually, it’s Games – plural – and they seem to drag on forever).

In essence, we’re witnessing a battle for jewelry (the highly coveted World Series Ring) and the chance to visit the White House without having to wait in line for a tour with one team paying $116 million more than the other team to be a part of this. It remains to be seen who’s going to win this, but it’s GOT to be a little galling for the Dodgers to realize they’ve clearly overpaid for their ticket – it’s like being on a luxury cruise for which you paid full price and have a nice cabin only to overhear the couple next to you on the Lido Deck that they paid practically half of what you shelled out, and they have the biggest cabin on the ship! When the World Series is over, and a victor is declared, it will obviously come down to one team outperforming the other – not how much money an owner decided to pay to cobble together their team.

Whether you’re looking to sell your home or buy one, this little slice of life taken from the baseball world is something you should take to heart. It doesn’t matter how much your prospective agent says she/he is willing to spend to market your property or what they’ll do to get you THE house, you should only concern yourself with one thing, and one thing only: their stats. Point blank ask them to show you their numbers – and the way they respond will tell you volumes, too. If they sidestep the question and try to show you their Yelp reviews and testimonials on their website, keep this in mind: these things can be . . . manipulated. That’s obvious, right?

Let me give you one more piece of advice: while you may think you’re the local equivalent to a member of the Shark Tank, I would recommend against trying to whittle down an agent’s commission. Rather than seeking out the agent who’s willing to do the job for the least amount of money, look for the agent who’s willing to work the hardest for you and produce the best results.

With all that said, I have one parting wish for you: may whoever you choose to represent you be able to help you faster than the length of a baseball season!