Category: Real Estate Statistics

A Valued Partner

No Better Time To Buy

A friend of mine who is far smarter than I am – hold the snide comments – sent me a link to an article that was written about two weeks ago.  I’ll include a link to the article below if you really want to read it:

http://bit.ly/2020REoutlook

This article is one of those that point out the reasons we should all be happy and dancing in the streets relative to how well the real estate market is performing . . . and for those of us who are homeowners, new and veteran, we do have great reason to be happy (although I’d recommend you be careful about dancing in the streets for a whole host of reasons – traffic, public safety, lack of coordination, etc.).

Two of the points the article makes are the economy is strong with little to no signs of slowing down and house values continue to increase at a healthy rate.  And just as your overall sense of warmth and fuzziness is about to envelop your whole self like a cozy bubble, you near the end of the article when you read a line that pops that bubble by mentioning that there’s an influx of buyers looking to flood an already constrained market.  Why would that be a bubble popper?

While the market is ready to welcome more buyers to the market as the Millennials age into and is prepared for it, there’s no mention in this article (or a whole host of others) that there’s an increase in inventory in the foreseeable future.  Translation: there’s still only X number of homes to sell and buy in 2020, so what are we as agents and mortgage professionals doing to get a portion of that market?

This year, we’ll see smarter, more savvy buyers who will be ready to “battle” for that limited inventory, and that will help weed out the agents and lenders who aren’t smart and savvy, for sure.  However, if that’s your only plan – outlasting a battle of attrition – to grab market share in 2020, that attrition will get you, too.

We don’t need to be shouting from our electronic soapboxes on social media that there’s no better time to buy than now or any other OBVIOUS truths – today’s potential homebuyer already knows that and will probably tune us out if that’s all we have to preach.  We need to go on the offensive and show the potential homebuyers WHY we’re the person they should hire to guide them through possibly the biggest transaction of their lives up to this point.

Over the last six months, I’ve met with a lot of great realtors who have shared marketing ideas with me that, I believe, are very smart and attractive.  They’re getting far more than the family-and-friends referral – the same referral that got so many into the business in the first place because “it was easy” – and they’re taking no prisoners.

What’s your game plan to increase your market share in a limited-opportunity market?  Is this regarded as no better time to buy? Besides providing loan products to close those transactions others can’t or won’t, our value is in helping you fine-tune and execute that plan.  If your lender ISN’T helping with that, there’s no value.

Links to other relevant mortgage articles

Real Estate is the Spice of Life

 

Real Estate Priority Lending LLC

Continuing the theme from last week’s Priority Pulse of offering something insightful and unique to your potential customers rather than reposting a meme that every realtor and their cat have already posted, I’ve prepared this idea for you.  This idea is meant to reach those who believe they know enough about the “investing world” that it’s hard for them to decide between purchasing a home or investing their money elsewhere.  (My “preferred” message for these types of people is to slap them upside the head and say something profound like, “Don’t be a fool,” but this idea involves less violence and will persuade more people.)

When you meet these folks who are weighing a purchase against another type of investment, ask them this simple question: Have you given your choices the SPICE test?  No, this isn’t a test designed to determine what investment the Spice Girls would recommend – it’s far less complicated.  While you still have their attention, tell them that SPICE stands for the following: Security, Payoff, Imitation, Control, Effort.

Real Estate S.P.I.C.E

Security:  Because real estate is brick and mortar, it’s not going to vanish.  Even if catastrophe (fire, flood, tornado, etc.) were to strike, you can insure your property against loss.  Most other types of investment don’t have any mechanisms that allow you to insure against loss – they have far less security than owning property.

Payoff:  Even when things went to hell in a hand basket in the earlier part of this century, if you didn’t do anything drastic and continued living your life in your home, your values have likely recovered, and you’re ahead again. (The same can be said moving forward.)  If your investment is stock in a particular company or product, you can’t decide whether that company or product will stay in business, and your payoff could be gone.  With a house, it’s still yours and the potential for payoff still exists.

Imitation:  Millions of people have done this before you, and just as many will do it after you – they’ve all demonstrated that the success of purchasing a home and owning it is easily imitated and repeatable.  Other types of investment don’t have anywhere close to that type of track record that you can trace and follow like you can with homeownership.

Control:  It’s your property.  You maintain it and improve it.  You’re the CEO and Board of Directors of your home.  With other investments, you’re HOPING the CEO and the Board will do smart things, but you have no control.

Effort:  You have to live somewhere.  You might as well make some money through paying down your mortgage and appreciation while you’re living your life – renting is not going to do that – so no extra effort is required. Other investments don’t offer that effortless combination.

You might say that I’ve oversimplified it, but the fact of the matter is when someone is trying to decide between purchasing a home or investing their money elsewhere, they’ve overcomplicated it.  By asking them to apply the SPICE test to their Real Estate choices, they’ll have a clearer view of what they’re truly undertaking, and you’ll be seen as the expert who helped them gain that vision.

Contact Priority Lending LLC for any help dealing with Real Estate today. Contact us to get started.

Operation Homeowner

 

In the early days of Word War II, before the United States joined in the fray, England’s European allies were quickly and systematically falling to the Nazi war machine. England, on its tiny island, was the David to Germany’s Goliath. Germany had an unparalleled advantage with an abundance of technological, industrial, and intellectual wealth at their disposal. Winston Churchill, the Prime Minister of England in these dark days, had no illusions about the Nazis’ power and resolve, but he refused to bow to what so many of his fellow citizens thought was inevitable: the surrender of Great Britain’s sovereignty to Adolf Hitler. Mr. Churchill knew he was outgunned and outmanned, and he had few allies. The only way he and his nation were going to gain an edge over the Germans was through creativity.

One such occasion, Operation Postmaster, involved an island off the coast of West Africa that was under Spanish control. At that time, Spain was neutral in the war, and there were certain rules of what you could and couldn’t do in neutral territory. The Italians had parked a large ship in the island’s tiny bay and turned it into a listening post for German U-Boats to hunt and destroy England’s ships in those waters. Alongside the Italian ship were parked two German ships that acted as support. This was really a no-no, but the Spanish governor of the island looked the other way. It was absolutely critical that these ships and their operations be neutralized, but destroying them would be an act of war committed in a neutral territory – this would not help England’s cause. They chose a more piratical solution.

On an moonless evening, a small group of commandos slipped into the small island’s harbor aboard two tugboats. On shore, English spies threw a large party for the Italians and Germans so the ships were virtually unmanned. While the party was in full tilt, the commandos boarded each vessel, destroyed the moorings, and tethered the Italian ship to one tug and the two German ships to the second tug. On board the Italian ship was a small crew of men who had not gone ashore, and they were summarily taken prisoner. As the party continued into the small hours of the morning, the tugboats whisked the Axis ships away and towed them out to international waters where an English battleship commandeered them as spoils of war. No casualties, and no violation of the rules of war. If it could ever be proven, the worst the English could be found guilty of would be grand theft boat (is that a term?) or “piracy” – which would fit nicely with their heritage.

Creative thinking is crucial in this business. A gentleman excitedly called me recently to ask about a hard-money option to finance the purchase of a home that he wanted to fix and flip. When I told him about the terms, interest rate, and down-payment requirements of a hard-money loan, his excitement turned to gloom, and he almost hung up on me. I told him he actually had three other options that had better interest rates, better terms, and no down-payment requirements. Recently, I worked with a woman who is self employed and didn’t have close to the necessary income to purchase a home on her own, and a co-borrower wasn’t an option for her. I then told her about another option that would enable her to purchase a home in her current circumstances, and she was excited. What are these options at which I’ve hinted? They’re not secret, but they are creative – creative enough that a lot of other lenders wouldn’t think of them at all. Give me a call and let’s discuss your plan of attack!

The Cost of Free

 

Lately, I have had a number of borrowers come to me specifically with the desire to purchase a home using a down-payment-assistance program.  These programs take on many different looks, but the gist is basically the same: someone is willing to give a borrower a percentage of the purchase price of a home to be used as a down payment, and the obligation is forgiven when the borrower has lived in the home for a certain period of time.

A lot of these borrowers who come to me call it “free money” –and that always makes me pause for a moment before I remind them that nothing is free and that there are two major factors that accompany these programs that MUST be considered and always have a direct effect on the amount of money a buyer can borrow:

  1. When someone uses a down-payment-assistance program, the banks who are lending the money will increase the interest rate, usually, by about 1.5%.  Obviously, the reason is the banks feel there’s more risk, so they require a little more from the borrower –and the other reason, let’s be honest, is the banks are legally allowed to charge that increased rate, so they do.
  2. The debt-to-income ratio, when compared to other options like an FHA loan, is significantly lower –this means that banks aren’t willing to lend as much money based on the borrower’s income.

After I explained this to a couple I recently met to discuss mortgage options, they asked me what this meant in “real” numbers, so I presented them with exactly that:

Based on their income, with the interest rate increase that the DPA program entails and the lower debt-to-income ratio, they would qualify for a mortgage of roughly $112,000.  Conversely, with the same income, if they came up with the down payment themselves (3.5% of the purchase price), the interest rate would be lower, and the debt-to-income ratio allowed would be higher –this means that they would qualify for a mortgage of roughly $193,000.  Before I could get that second number completely out of my mouth, one of the borrowers said, “That’s an $81,000 difference!  Are you serious?”

While I assured the couple that I was serious, I then asked them which option they would prefer: buy a smaller house so they could get “free” money or look into ways they could put together the 3.5% needed to make the down payment themselves so they could afford a larger house and have more choice of houses.  They decided to find the money to make the down payment themselves –the $81,000 cost of “free” was a lot more expensive than $6,755 (which is 3.5% of $193,000).  Can’t argue with that!

The Naked Truth About Real Estate & Lending

 

For those of you who are paying attention, you might remember that I wrote about an experience I had at my local gym with a gentleman who was heavily “inked” – that’s the cool way of saying he had tattoos, in case any of you are wondering. As we sat in the sauna, he told me that all the work done on his upper torso amounted to approximately 100 hours of work, and it cost $85/hr to have an artist repeatedly jab you with a needle (I’ve done that for free at the local blood bank when the technician couldn’t find my vein). Fun! I used that experience to write about how this guy was a walking “down payment” for a house because he had spent $8,500 – more than enough to purchase a home in the range of $200,000. If it’s all coming back to you, I apologize for boring you. For those of you who don’t recall, you have just read the Reader’s Digest version (truth be told, though, the original is MUCH funnier). Since that experience, I’ve kept a small notebook and written down some of the more wacky experiences I’ve had with my fellow sauna enthusiasts (and in case you’re wondering: no, I don’t take the notebook in the sauna – I wait until I get home and write in my notebook at that time). Here’s just a sampling of those experiences:

 The gentleman who stood up and proceeded to inhale deeply through his nose and exhale through his mouth. On the surface, nothing weird about that. However, he either ate a 55-gallon drum full of rotten fish or something had died inside him. Within seconds, the odor FILLED the sauna. With my eyes watering up at an alarming rate, I barely made it to the door before being blinded by my own tears.

 The gentleman who insisted that we turn out the light in the sauna room because IT GAVE OFF TOO MUCH HEAT. Really? You’ve VOLUNTARILY walked into a room that’s kept north of 200 degrees, and you’re worried about a 60-watt bulb pumping out enough ADDITIONAL heat to make you feel uncomfortable?

 The NUMEROUS gentlemen who walk into the sauna without nary a towel (and they sit wherever they want). I’ve found there’s an interesting matrix involving age and body mass to predict how much clothing someone will be wearing in the sauna: the older and bigger a man is, the more shamelessly naked he will enjoy his sauna session.

These three types of sauna goers are perfect examples of people we mortgage and real estate folks deal with on a daily basis. The bad-breath guy is like the client who needs help with his credit score – the equivalent to giving him a Tic Tac – so his offer will get accepted. Then there’s the light-bulb guy. This, of course, is the client who lucks into finding a home in his price range with a beautifully remodeled chef’s kitchen but complains about the color of the grout in the backsplash. And last but certainly not least is naked man who is the pathological oversharer. You ask him for his birthdate, and you suddenly find that you’ve lost thirty minutes of your life and know everything about his gallbladder surgery and where he has travelled so far around the world to collect spoons. Obviously, we have to be licensed to perform our jobs, and it’s this very licensing coupled with our knowledge that adds invaluable worth to the transaction. But where we really EARN our living is dealing with so many different personalities and making it look easy, right?

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