Category: General

Why
are
social media like Facebook and Instagram
so darn popular among real estate and mortgage folks?  Hint: the top reason might be an endless
supply of memes, cat videos, and the chance to be snarky, but the other reason
runs a VERY CLOSE second.  Give up?  Answer:
They’re free –
and they really help even the playing field by enabling a one-person shop look
and market like an organization who employs an army of wordsmiths and graphic
artists. This new century is glorious, right?
With that in mind, let me re-introduce you to a centuries-old concept
that is equally glorious –
and can help IMPROVE the playing field for you, regardless of the size of your
team: karma.  On the subject of “free”,
I’m not suggesting that you work for free, but when you freely give of yourself
and your knowledge, you’ll see a greater payoff, I promise!

Recently,
an agent came to us with a question: she has a client who is looking to sell
his condo.  It’s no longer warrantable,
and the value is around $45,000.  He owns
the condo free and clear, and really just wants to walk away from it netting
$45,000.  The agent knew, of course, that
no bank would lend on this, so she asked us for a possible solution.  We could tell by her body language that she
had already approached a number of our competitors, and they had all, most
likely in a very nice way, told her that it just wasn’t possible citing one or
two of the obvious reasons.  Rather than
joining the chorus of negativity, we offered her this solution:

The
seller could put the condo up for sale for $60,000 and advertise it as a
seller-carryback loan.  He would require
the buyer to provide a down payment of 20%, or $12,000 –
this leaves a balance of $48,000, which the seller now carries as a mortgage
(he acts like a bank).  Are you with me
so far?

The
seller then takes this $48,000 balance and splits it into two notes: the
first-position note is for $29,250 at an interest rate of 10% (I’ll explain how
we arrived at those amounts in just a moment); the second-position note is for
$18,750 at an interest rate of 10%.  The
seller turns around and seeks out an investor who buys notes (or mortgages) and
sells the first-position note of $29,250.

In
the market today, investors who buy notes like these usually want to see a
Loan-To-Value Ratio (LTV) of no more than 65%, and they want the interest rate
to be healthy.  In this case, $29,250 is
65% of the value of the condo, $45,000; 10% interest is something that will
give these investors a reasonable return.
Any higher LTV or lower interest rate, and it’s likely potential
investors will start vanishing.

This
solution provides the seller with $12,000 from the down payment from the buyer
of the condo plus $29,250 with the sale of the first-position note to an
investor –
he immediately nets $41,250, which is not quite the $45K he was looking to
net.  Have no fear: we’re not asking him
to settle.  Remember the second-position
note?  Using just simple interest for the
sake of the analysis, the seller would receive a check for a little over $150
each month from the title company on this second-position note.  In just two years, the seller will have
received enough in residual income to get him up to that $45K net mark –
and he’ll continue to receive residual income until that second-position note
is satisfied.

Wait,
it gets better!  By selling the condo for
$60,000 (using our solution), the agent helps improve the comps for the condo
complex.  In the meantime, she can meet
with other owners in the same complex who are looking to sell and help them,
too –
a growing list of referrals.  Perhaps the
HOA will erect a statue in her honor!
Our solution does nothing for us –
we make money by writing loans, and this isn’t a loan we can write –
but it was the right thing to do.  While
karma usually gets a bad rap, she’s got your back, too.  Hugs and kisses, karma!

Each
week I try to write something that will either make you think about a rather
humdrum mortgage/real estate topic in a new way or at least clear the cerebral
cobwebs.  Admittedly, some weeks I’m
better at accomplishing that than others –
my apologies for those “off” weeks.  As
I’ve been trying to come up with a topic for this week’s missive, it’s not so
much that I’ve been hitting a brick wall that’s been keeping me from
inspiration, it’s that I’ve felt sort of “dragged down” by so many things that
have been happening here in our own backyard over the past few weeks that have
been . . . less than inspiring.

It
seems that wherever you turn –
TV, radio, Facebook, Instagram,
newspapers (they still exist) –
one party isn’t happy unless the opposing party is proven wrong and/or
devastated.  I’m not advocating the
philosophy that “everyone’s a winner and should get a trophy just for showing
up” –
I’m an advocate of just the opposite when it comes to competition: people learn
from not always winning.  No, what I mean
is that there’s so much hatred and vitriol (that’s a fancy word for low-down
dirty meanness) being poured out in these written and verbal attacks, you’d
think the subject being contended were a matter of life and death EVERY
TIME.  How exhausting!

I’m
reminded of a quote from the novel To Kill a Mockingbird
where the father, Atticus Finch, is helping his daughter, Scout, understand a
fundamental truth: “First of all, if you can learn a simple trick, Scout,
you’ll get along a lot better with all kinds of folks.  You never really understand a person until
you consider all things from his point of view . . . until you climb into his
skin and walk around in it.”  Obviously,
the family patriarch isn’t suggesting his daughter pull a Silence of the Lambs
on anyone.  His advice, though, that she
stop for a minute and understand another person’s point of view will
help defuse most situations or at least soften what may be prepared to come out
of her mouth or flow from her fingers on a keyboard.  We’d all be better off following Mr. Finch’s
advice.

In
a real estate transaction, you have two sides, and that’s okay.  What’s not okay, though, is that these two
sides are, far too often, viewed as opposing sides –
and that hurts far more than it helps.
Before a home goes under contract, sure, fight like the dickens to get
the best price (for the buyer and the seller).
However, once that house goes under contract, the two sides should now
operate as a team.  Each member of that
team, certainly, has different responsibilities and should be willing to live
up to them in their entirety.  But the
fact of the matter is everyone in that transaction has THE SAME GOAL: close the
deal for the agreed-upon price ON TIME.
Climb into the other party’s skin, metaphorically (let’s be clear), and
walk around for a while so you can understand that you have the same goal.  Again, we’d all be better off following Mr.
Finch’s advice, right?

Well,
let me give you one more morsel of homespun wisdom from Harper Lee’s American
literary classic.  Atticus has been asked
to defend someone in court, and he knows it’s not a popular position he’s about
to assume among his peers and neighbors, but he says this to his kids: “This
time we aren’t fighting the Yankees, we’re fighting our friends.  But remember this, no matter how bitter
things get, they’re still our friends and this is still our home.”  Let’s all remember, real estate is important,
but it isn’t a matter of life and death!
Perspective produces progress.

I
recently came across a survey conducted by a company called CentSai
that involved 2,050 Americans aged 18-34.
The major upshot: Millennials are far more traditional about home buying
than previously believed.  Let’s take a
look at some of the stats from the survey:

     •91%
will use an online site or mobile app to research neighborhoods, homes, and
prices (nothing earth shattering about that, but I thought it would be nice to
start off “soft”)

     •75%
said they will use a LOCAL real estate agent instead of an online agent
(interested yet?)

     •71%
said they will use a LOCAL lender (does that mean they’d rather have
face-to-face interaction over a matter that will most likely be the biggest
financial decision in their lives up to this point?)

      •56%
plan to purchase a home in the next two years

While
you attempt to stop your head from spinning off your shoulders, let me add
something.  Currently here in the United
States, the 18-34 age group is about 76 million people.  Using the last statistic listed above, that
means 42.5 million people plan on purchasing a home in the next two years!  (If that last little tidbit did, in fact,
make your head spin off your shoulders, use some duct tape.)

Homes
aren’t being built nearly quickly enough to keep up with that number.  Add in all the people in other age groups who
are planning on purchasing in the next two years, along with the folks who will
be purchasing investment properties and second homes, and suddenly you’re
looking at the makings of quite a Sisyphean task for the real estate world (for
both agents and clients).  (A Sisyphean
task is one that’s impossible to complete; it was named after a chap in Greek
mythology who was forced to push a huge rock up a hill while showing distressed
properties to potential clients who refused to get prequalified.)  Fear not: I have an idea that can help a lot
of you.

Priority
Lending is going to become a matchmaking service –
the eHarmony or Match.com
of the mortgage/real estate world.  Both
agents and potential home buyers should come to us for a “get to know you”
session.  We’ll be able to get a feel for
your personality, your likes and dislikes, etc. and then start matching you up
with the right partner in this quest.
However, before we send you out on your first date, we’re going to
prepare you.  Agents, we’re going to make
sure you know how to answer any question your date will throw at you to assure
you get that second date.  Potential home
buyers, we’re going to help you understand what’s going through a realtor’s
head so the two of you can be on the same page –
it makes for a much more pleasant dating experience, which will lead to the Big
M.  Yes, you guessed it: Mortgage.

Rather
than trying to go it alone and
establishing your own love connection, come to us first.  We’ll get you prepared so that you make the
coolest power couple around.  That dream
house will be yours because NO ONE will be better equipped to negotiate and
find creative solutions than you will be!
Our new motto: Priority Lending, Love Conquers All!  Let it grow on you.

In
this newsletter, I’ve
tried to deliver wise advice and insights that might help you navigate your
daily journey through the
real estate and mortgage world.  I’ve
tried to keep it lighthearted so at least some of the stuff you learn here
might come in
handy during a spirited game of Trivial Pursuit. You
could also argue that
my newsletter
aren’t
exactly on par with Nietzsche (which is perfectly fine with me because I gather
he’d be a real downer at a party) and are light on what some people would call
“facts”.  Today’s
edition,
though,
turns its back on frivolity and mirth to serve a higher purpose by announcing
I’ve decided to become a medical expert and warn you of a dangerous and
potentially lethal malady that is reaching epidemic proportions. What formal
medical training have I undergone, you ask? We needn’t dwell on such trivial
matters when lives are at stake, people!The disease to which I’m referring is HPV! There are a lot of commercials
these days talking about being tested for HPV, but that’s a whole other issue.
The HPV of which I speak doesn’t have any fancy commercials or public service
announcements aimed at educating the public about its dangers because those who
catch it are
already oblivious. This
HPV is He-Man Pamplona Virus: an infectious neurological disorder that mutates
the brains of many
in the male
portion of the species causing them to do all sorts of stupid things. It’s
named after the mindset of those folks
who
run with the bulls through very tight alleys and narrow streets in Pamplona,
Spain, each year, but this affliction knows no international borders, cultural
boundaries, or specific age range
–
and some women are known to catch it!This tragic disease manifests itself in so many ugly ways! Here’s a list of
just a few: getting a double hernia from refusing to lift with your legs,
running for political office, wearing Spandex at ANYTIME, posting a video on
YouTube of yourself lip-synching an REO
Speedwagon
song,
being an actual member of REO Speedwagon
and STILL
touring, NASCAR, cage fighting, the creation of Pokémon
GO, running
an Ironman Triathlon, karaoke, the wearing of pants so low that even a midget
pickpocket has to reach down, etc.  We haven’t
even scratched the surface, and you can already see how pervasive a reach and
tenacious a hold this disease has.Where
it’s hitting closest to home, my friends, is in the mindset that it’s smarter
to rent than buy a home.  Sure, there are
statistics and numbers that support renting over buying in a very slim number
of cases, but those are certainly the exception to the rule. The best litmus
test for determining whether someone is afflicted with homeownership-related
HPV is to ask the question: “Why are you still renting instead of buying?”  If their response is on par with “I don’t
have enough for a down payment” or “I’m working on my credit score”, they don’t
have it; they obviously have a plan.
However, if they say anything like “I’m not sure I want to stay here for
a long time” or “this just makes more sense for ME”, they have it.  Those responses tell you that they believe
they’re smarter than the rest of the world –
smarter than the likes of Warren Buffet –
and HPV has gone into full bloom in their brains.

There’s
an old joke that goes like this: “How many psychiatrists does it take to change
a light bulb?”  Answer: “It doesn’t
matter.  The light bulb has to WANT to
change.”  Homeownership-related HPV is
completely curable, but the afflicted persons have to WANT to change their
outlook on renting versus buying.  You
can’t argue them into “healing” just like you couldn’t argue with George
Mallory’s answer to the question about why he wanted to climb Mt. Everest:
“Because it’s there.”  We all know that
didn’t end well for George.  Don’t give
up hope, though.  Once these folks see
all their friends moving into fixer-uppers and starter homes and getting
REFUNDS on their taxes because of the interest rather than PAYING taxes,
they’ll want to go cold turkey.