Category: General

Perception is Reality

2 signs that says impossible and possible
I came across an article about the top grossing movies of all time, and my mind
immediately ran to the likes of Titanic and
Star Wars.  However, the author of the article factored inflation
into the equation to determine which movie truly had the greatest draw with the
public –
his argument was that a movie coming out today will make far more money with
ticket prices being higher than one that came out 50 years ago.  With those adjustments, Gone With the Wind
came out on top.  It’s not a bad flick,
but I was a little surprised.  However,
you can’t argue with the numbers based on popular vote via purchases.
the odd thing, though: according to the American Film Institute (AFI) –
the self-appointed vanguard of all things cinematic –
the greatest film of all time is Citizen Kane,
a movie about a man who was fueled to succeed at all costs by his resentment
for his parents for naming his childhood snow sled “Rosebud” instead of
something way cooler like “Widowmaker”
or “Death on Rails”.  (I’ll
admit, I’ve never seen more than 30 seconds of this movie.)  Ironically, Citizen Kane
didn’t even rank in the top 10 highest-grossing films of all time.  How could a movie be so great if it wasn’t
that popular?  Hmmm.
have a similar problem in the real estate and mortgage world –
let me frame it up for you: according to a recent survey by the National
Association of Realtors, only 13%
of adults 34 years of age and younger realize they can buy a house with a down
payment of 5%
.  In response to this, the findings of a joint
research study by Fannie Mae and California State University-Fullerton prompted
this conclusion: “Correcting consumer misconceptions may be a more efficient
approach to expanding homeownership opportunities by encouraging households who
may already be qualified to own homes.”
Translation: we need to simplify our marketing.
we market a property to emotional buyers by displaying beautiful photos and
extolling the virtues of the public schools, or we go after the
dollars-and-cents buyers by demonstrating that their monthly payment can be
less than what they’re paying in rent, we’re not acknowledging and addressing
the even more fundamental concern of having enough for a down payment.  If buyers believe they don’t have enough
money for a down payment, all the beautiful photos and statistical analyses
aren’t going to do any good: they’ve already shut themselves off from even
considering a purchase.
possible to get an FHA loan with only a 3.5% down payment. Perhaps
the next email drip for a $200K house
should simply read, “For
only $7K down, this could
yours.”  On a conventional loan, there’s an option for
a 3% down payment. So, for a $300K house, maybe it makes more sense to
advertise it with a headline like this: “Down payment of ONLY $9K!”  When an agent is being interviewed by a
potential buyer, maybe a good opening question from the agent should be, “Did
you know that since the 1980s, FHA has backed home loans with only a 5% down
payment?”  Headlines and questions like
these get to the heart of the matter and help buyers immediately see it’s
possible to buy now rather than wait!


to realize this need to change how we market is like AFI stubbornly insisting
that Citizen
Kane is
the greatest movie of all time.  We may
have the “greatest” social media posts or the “greatest” marketing brochures,
but folks aren’t going to be converted from potential homebuyers to actual
homebuyers if their perception is that they don’t have enough for a down
payment.  As the old saying goes,
perception is reality.  There’s another
old saying from Gone
With the Wind that
applies –
something potential homebuyers are going to tell us if we don’t clue in and
change: “Frankly, I don’t give a damn.”

This is Only a Test

Explosion in the ocean in black and white.
Okay, it’s not really a test – it’s more like a quiz, but it doesn’t have the same verbal POW when you say, “This is only a quiz.” Do you feel me?  Yes, the photo above does depict an actual TEST of an explosive device, but I promise you that this quiz and its answers will blow your mind.  Too corny?  Sorry about that.  Moving on.
I’ll keep it short – just three questions.  Ready?  Here we go:
1. With a 580 FICO on an FHA loan, what is the minimum down payment requirement?
     a. 3.5%
     b. 15%
     c. 20%
     d. FHA loans require a 620 minimum FICO score
2. With a FICO over 700 on a Conventional loan, what’s the lowest minimum down payment?
     a. 1%
     b. 5%
     c. 10%
     d. 20%
3. According to the NAR’s latest data, the typical down payment for 60% of first-time home buyers is _____ or less?
     a. 6%
     b. 9%
     c. 12%
     d. 15%
The answer to all three questions is “a” – did I make it too obvious?  Seriously, though, most borrowers we meet are stunned (in a good way, of course) to learn that a 580 FICO may only require a 3.5% down payment.  Along those same lines, they’re equally stunned that a 700+ FICO opens up the possibility of only having to come up with a 1% down payment.  Lastly, far more than half of the potential buyers we help know that a 20% down payment is NOT the “normal” amount required in most transactions.  Since the 1980s, FHA has backed home loans with only a 5% down payment; since the 1990s, Conventional loans have had a similar minimum requirement.
If you got all three questions right, you’re probably already in a home of your own and/or you’re a real estate zen master – kudos to you on either or both fronts!  If you got two out of three correct, regardless of which one you missed, it means you could be leaving money on the table or you’re waiting longer than you need to get into a house.  If you only got one question correct – let’s be honest – that was probably just luck. 🙂  With that said, the difference between THINKING you know what’s required and KNOWING what’s required to get into a house can be worth A LOT of money and time you don’t need to spend.
You have to admit the results of this quiz are going to help you far more than the one you took last week on Facebook that helped you figure out which men’s romper would look best on you (or your boyfriend) – and the answer, obviously, is NOT A SINGLE ONE.

Pucker Up

woman and a boy in a picture together.
I saw an infographic
either on Facebook or Instagram
(which means it HAS TO BE TRUE) that read something like this: “80% of all
plane crashes occur in either the first 3 minutes or the last 8 minutes of a
flight.”  Hmmmm.  I guess that’s one way to look at the data –
and I guess it’s encouraging to those nervous flyers who like to play the odds –
that if you have a 120-minute flight, you have a high percentage of living
blissfully for the 109 minutes between takeoff and landing.  However, the infographic
would be more accurate if it read something like this: “100% of ALL plane
crashes occur in the last 10 seconds of a flight.”  Before you curl up in the fetal position and
hide under your desk in light of this grim statistic, take a few deep breaths,
and let me explain: no matter how you couch the truth, it’s still the
a new website out in Internetland
(I’m sure that’s what Al Gore wanted to name it when he invented the Internet)
with the domain name of First.IO.  Yes, just type that into your browser without
a “www” or a “.com”, and you’ll be taken to this new and very interesting
place.  In essence, the website asks real
estate agents to upload their databases of contacts.  Once this is done, the website starts mining
all the data that’s floating out there (in Internetland)
as a result of everyone using social media, buying things from Amazon, reading
their favorite blogs, scanning other websites, trolling through Pinterest,
etc., to determine when an agent’s contact is ready to buy or sell a home.  Yes, it’s happening.  I don’t bring this up to launch a formal
protest or throw my support behind it –
I bring this up simply to point out the obvious: the technology is only going
to get more sophisticated as time goes on.
However, no matter how sophisticated it gets, there’s a rock-solid truth
that still exists: it’s only as good as the person who’s using it (no matter
how you couch the truth, it’s still the truth).
me use a cheesy sports analogy: golf club companies are continually coming out
with new drivers and irons to help a player hit the ball farther, but if the
player has a crap swing, it doesn’t matter how much he spent on that club –
the ball isn’t going to fly off into the stratosphere.  In the real estate world, as technology
continues to develop to do more and more of this “grunt work” of database
management, prospecting, etc., it still comes down to the agent’s skills.  The flashy websites and mobile apps are
great, and they can really help attract and garner attention, but what keeps
them is the agent’s local knowledge, negotiating skills, connections to other
professionals, etc.
an old saying that goes something like this: if you put lipstick on a pig, it’s
still a pig. Just because someone invests the money and time in the latest and
greatest doodad doesn’t make them a great agent.  Technology can certainly enhance a great
agent’s talents and skills, but if an agent doesn’t take the time to develop
and hone talents and skills, they’re just a pig looking to kiss someone –
and no one needs that.


Credit’s Costs, Part II

credit card in a womans wallet
up front, I’m going to admit that this week’s edition is going to be HEAVILY
borrowed –
nay, copied word for word –
from an article recently written by Ken Harney, a gentleman who covers housing
issues on Capitol Hill for The Washington Post Writers Group.  He does a great job of citing rules and
sources –
it would be sort of dumb for me to try and rewrite it and try to pass it off
for my own product.  Read on:
You’ve almost certainly seen or heard
pitches for “credit-repair” services promising to clean up your credit
problems, reduce your debt or even raise your credit score by 100 points.
But experts warn that these services can
do far more harm than good to mortgage seekers — even get them rejected on the
In fact, the Consumer Financial
Protection Bureau has won two new legal settlements worth more than $2 million
in penalties against credit-repair companies.
The CFPB alleged that Prime Credit, IMC
Capital, Commercial Credit Consultants and Park View Law charged clients
illegal advance fees and misled customers about what could be done for them.
The defendants neither admitted nor denied the allegations, but they agreed to
the settlements.
Under federal law, credit-repair
companies may seek payment only when they can document improvements made for a
client. Up until then, consumers shouldn’t have to pay a cent. But the
companies in the settlements required an initial “consultation” charge typically
of $59.95, hundreds of dollars for a “set-up fee” and monthly fees of $89.99.
For typical clients — and there were
thousands of them — the companies sent letters to the national credit bureaus
challenging “much of the negative information” in credit reports, “even if that
information was accurate,” according to the CFPB. The companies then didn’t
follow up or determine whether they had raised clients’ scores.
“We run into the damage they do every
week,” said Joe Petrowsky, president of Right Trac Financial Group in Connecticut. But “you
can’t get a mortgage with outstanding disputes” on your credit files.
Thomas Conwell III, CEO of Michigan-based
Credit Technologies, which provides credit reports to lenders, says, “There is
nothing any credit-repair company can do that consumers can’t do for themselves
faster and at no cost.”
realize I wrote about this not too long ago, but I believe these recent
developments concerning the CFPB’s actions warrant bringing this back for a
second look.  Keying off of Mr. Conwell’s
comments above, potential home buyers can do this for themselves –
and we can help direct their efforts.
They should save that money and buy themselves a nice house-warming
gift!  With anything left over, we
wouldn’t say no to a box of doughnuts or a pizza.


The Beauty of Ugly

A very old abandoned building.
an old saying, “A face only a mother could love.”  (I can assure you it was invented centuries
before I was born.)  That saying, though,
does remind me of the actor Steve Buscemi.  Most everyone knows he’s made a career for
himself being the “weird looking guy” in movies, and I’m going to take a wild
guess and say his paychecks have been healthy enough to buy a couple of houses.  With that said, though, I’m sure in very
short order, he realized that he wouldn’t be winning the parts of Ethan Hunt in
“Mission: Impossible” or Logan in “X Men” –
he sought out what he thought was available and reachable.
most of us want the brand new house that no one has lived in before us or the
beautifully maintained house that has a fully remodeled kitchen and newly
expanded master bathroom.  Conversely,
we’re not walking around and saying to ourselves and anyone who
will listen, “I want the house that had a small fire on the back half of it
twelve years ago and has never been repaired.
An added bonus would be if it had a cracked foundation!”  In most parts of the country, at present,
we’re running into a significant inventory shortage, and the houses with fire
damage and cracked foundations are quickly becoming what’s left after the
bidding wars have occurred and only one “winner” (per house) has emerged.  In 99% of these cases, these homes are “unlendable”

it’s a weird term the spellcheck on your computer will tell you is incorrect or
nonexistent, but in the real estate/mortgage world, it’s both real and a really
big problem.  Even for someone who has
the guts to take on a project like this, while these properties are “unlendable”
(meaning: most mortgage companies won’t lend on such a property), these same
gutsy people don’t have enough cash lying around to purchase these
properties.  Enter: the wholesaler.
simply, a property wholesaler will approach the owner of a property (in most
cases the property is distressed to some degree and unlendable),
agree on a price, put the home under contract, and then market the property to
a list of investors so one of them will purchase the property for a higher
price.  The investor will rehab the
property, get it to a point at which it is now “habitable” (this also means
it’s eligible for lending), and either keep it as a rental property or turn
around and sell it to someone who will purchase it through a mortgage.  That’s property wholesale in VERY broad
these days of low inventory, knowing a wholesaler can give you an edge, but
you’ll have to be a little patient.  One
way a relationship with a wholesaler could benefit you is they often have the
connections to find these less-than-desirable properties (they’re in desirable
areas; their conditions aren’t desirable) that many don’t.  Although these properties are considered
conventionally “unlendable”,
we can help you find financing options that will enable you to purchase the
property from the wholesaler and do the remodeling to make the property
habitable that many mortgage companies can’t or won’t provide.  Another way a relationship with a wholesaler
could benefit you is you can ask them to connect you with some of their regular
investors who generally sell rather than rent out the finished properties –
these investors could give you first look at a property even while the
remodeling (you know, the highly desirable remodeled kitchen and expanded
master bathroom) is being completed.  Of
course, once it’s completed, the home is habitable and lendable –
and everyone does the happy dance.
the next time you’re watching “Grown Ups” or “Billy Madison” and you see Buscemi
playing his own brand of weird, you can say to yourself, “If someone who looks
like that can get a house, so can I!”


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