Category: Info For Buyers

Category: Info For Buyers

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Real Estate: Crash, Correction, Or Neither?

“The Sky Is Falling! …Or Is It? A quick insider look at what a real estate market is made up of1 Depending on who you listen to or what source you’re getting your information from, the real estate market is one where you will find the most certain and uncertain people literally at the same time, saying the same things, in their own different way. And don’t be surprised if you hear influencer “guru’s” and top-name celebrities and even influencer real estate “celebrities” share their “insight” to the direction of the market…they will be happy to do so, after all, it gets attention and ultimately it gets the clicks they’re looking for out of you. But is there any truth behind their statements?  Well I guess it depends on which independent statement you’re referring to and what the agenda of that individual happens to be at that moment. Remember, anyone can say “The Sky Is Falling!” as loudly as they want, but it doesn’t mean that it is, or, better yet, what exactly is falling from the sky?  Is it rain?  Is it leaves?  Is it an acorn that drops on your head because you’re under a tree?  Either way, what I am trying to say is; no one can predict what’s going to happen next, no matter how big or how relevant the source saying it, is. So Then Will There Be A Crash, Or Not? Since even the biggest “names” can have inaccurate predictions Well, the market isn’t primed for a crash, but that doesn’t mean there can’t be one.  Let’s take a look at the most recent “crash” that resides in all of our minds, the crash of 2008. Back in 2008 banks were literally giving loans away to anyone who asked for one.  It was almost as though banks had a serious quota they were about to miss, and if they didn’t give loans to everyone, they would suffer greatly! So that’s what they did.  There was even speculation that a select big-name bank had issued a mortgage to a dog.  Yes, a dog.  Don’t ask. The fact that even a canine was able to get a loan was the most disturbing part of it all, but also was the greatest indicator that the banking sector was primed to be in serious trouble. A wide variety of high-risk loans were being given to people who barely went through a financial qualification process, others opted for loans which didn’t make financial sense (interest-only loans, anyone?) and yet others were even going so far as to either inflate their income artificially, or, simply fabricated their income altogether just to get a mortgage. What followed was a real estate boom. You had buyers all over purchasing homes like crazy.  Prices went through the roof and affordability quickly became an issue.  This is the basis of those today who claim there’s a “crash coming,” the rush of buyers and lack of affordability. What’s being forgotten, however, is that the main factor for the crash of 2008 is completely missing from this equation; the banks lending frivolously.   Ultimately, a great number of people who were financially undeserving of loans were beginning to default on their loans and thus a sell-off of properties began, creating an overabundance of homes for sale, creating a crash of home prices, defaults, foreclosures, short sales, etc., and there you have it, the Crash of 2008. We’re not there, we’re not even there.  So we can put this theory to bed. The next theory was “the pandemic.”  The pandemic was supposed to not only bring the real estate market to a halt from its high prices, but was supposed to reverse them altogether. The theory was that without jobs and the ability to work, people wouldn’t be able to afford their mortgage payments and as a result be forced to sell, injecting more homes for sale, bringing the extreme seller’s market down because inventory (homes for sale) would be on the rise.   Unfortunately, not enough homes came to the market because both federal and state governments stepped in along with the banking industry and literally fed money into the hands of Americans enabling them the ability to pay their bills, while banks enabled homeowners to defer payments temporarily. Crash averted. The Possibility Of A Real Estate “Correction” If it isn’t going to swing back the other way, then maybe this The more likely scenario would be a “correction,” but like with everything else, there has to be both a basis and a reason.  So far, we have the basis; home affordability is reaching an all-time low when now also combined with decade-high mortgage interest rates, but the reason would have to include an adjustment in the supply and demand. Will the basis outreach the reason or could they both work together to make a correction happen? So far in 2024 the answer is “no.”  While there has been a drop-off in buyer activity, the drop-off wasn’t enough that it will prevent bid wars from occurring on homes.  Bidding wars are still rampant at the moment.  The theory is that a hike in interest rates is not powerful enough to stop the supply-and-demand issues.   Purchase power has also seen a boost with work wages increasing across the board in New York, enabling people to afford more even if it costs more. What would have to happen in order for a correction to occur? It’s my theory that we would have to see high interest rates throughout the summer going into the fall.  During the fall and winter seasons, real estate is at its least active, if the combination of inactivity (by comparison) and high interest rates were to persist, it may create a situation where home buyers would lessen, putting relief on the supply-and-demand issue. Alternatively, an ironic way to fix the issue may be if interest rates were to fall.  One key factor among homeowners not wanting to sell their home is tied to the interest

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The War On REALTOR® Commissions

What Is Actually Happening? Many news and media outlets have reported about this, but what’s the truth?1 (YourHomeYourTerms Team Agents are fully prepared for this scenario and you will have the least hassles with this using us.  CLICK HERE to visit our Buyer page when you’re done reading to reach out to us) In a nutshell, a combination of homeowners and attorneys agreed that real estate agents have been “inflating” their commissions due to a policy by the National Association of REALTORS® stating that agents must offer agents a minimum commission for bringing the buyer who ultimately purchases a home. The argument also included that home prices were increased artificially to cover these real estate commissions. Is this truly the case? Is this what has been happening?  Let’s explore the subject to find out. Commissions & Home Pricing What was actually happening and is there a true connection? The alleged “6%” commission has been talked about for what feels like ages, and that seemed to be a basis (if not the basis) of this alleged “padding” of home pricing. The theory is that if real estate commissions were reduced, home prices would follow.  Unfortunately, this couldn’t be further from the truth and actually challenges the intelligence of economists everywhere. The raw fact of the matter is that home prices are strictly dictated by the law of supply and demand.  As of this post, there has been a years-long shortage of properties for buyers to purchase, creating multiple offer scenarios and extraordinary offers which accompanied. Appraisals have been increasing steadily due to this market condition, and therefore home prices have not only been on the rise, but are rising with evidence now provided by the banks themselves when they approve a loan for the appraised amount. As we speak about appraisals, a licensed appraiser will not factor a real estate commission into the value of a property, so whatever “inflating” that is occurring as a result of “high commissions” are not and will not be considered.  In other words, a home will fail to appraise at the comparable value of the property plus commissions, and in order for appraisals to be affected by real estate commissions, it would have to have done so from the start.   The Buyers Are Footing The Bill Quick Math: Commission + Down Payment + Closing Costs = “The Straw” One of the greatest concerns that accompany the misguided lawsuit includes the responsibility of the buyers.  It is argued that the buyer has the highest costs throughout the real estate process and to add a real estate commission to the mix may be the proverbial straw that breaks the camel’s back. As a result, buyers may become qualified for less, creating a “cement ceiling” of sorts, which may cause property prices to drop, but at the cost of the buyers themselves, rather than “saving money for the homeowners.” The other consideration is that many homeowners who may benefit from this will become buyers themselves and may be faced with the reality of paying real estate commissions after the sale of their home.  When you combine the reduction of property values (due to buyers now being qualified for less), you can see that there is potential for a market decline; but instead of celebrating this newfound “affordability,” the decline will be at the expense of buyer and seller alike. Thanks, greedy attorneys!   On a semi-related side note, I am fairly certain that the attorneys responsible for the lawsuit collected a “standard fee” from the homeowners they involved, and that the homeowners received a paltry fraction of the total award as a result.  How ironic. Does This Really End Shared Commission? Will Seller’s Agents No Longer Offer Commission To Buyer’s Agents? As of this moment the answer to the question is essentially “No.”  Homeowners still have the option to offer compensation to a buyer’s agent the same as before.  The only real change there will be initially as a result of this lawsuit is that the Clear Cooperation Policy from the National Association of REALTORS® (the portion of the policy that dictates that commissions must be offered to a buyer’s agent, whether it’s 0.01 cents “6%” or anything in between) will discontinue and that the buyer’s agent / broker’s agent commission input section on the agent side of the MLS will no longer be there.   In other words, REALTORS® will no longer be able to share commission-offered amounts on each property through the MLS.  It will be up to the buyer’s agent to contact each agent representing each property to see if any commissions are being offered, if not, then it will be up to the buyer to pay any commissions in whatever way it was discussed during the initial consultation between buyers and buyer’s agent. Alternatively, REALTORS® may opt to share commission information on websites other than the MLS to discuss commissions to buyer’s agents, however, the Department of Justice may be looking to put an end to that idea as well, preventing any discussion of buyer agency commissions across the board with the exception of person-to-person communication.  More on that as time goes on. How Do Buyers Pay Commissions? Buyers have a few choices and options which may work As time goes on and more buyers are faced with the reality of paying buyer agent commissions, the question of how they are going to pay and what methods are available for them to pay come to the fore-front.  There are currently a few ways in which a buyer can pay these commissions with the least hassles possible: Build it into the offer(Offer is for $500,000, minus REALTOR® commission) Build it on top of the offer(Offer is $500,000 plus REALTOR® commission) Pack it into the mortgage(Mortgage of $500,000 plus REALTOR® commission) Pay the commission out of pocket(Write a check at closing) These are some worthwhile options that any buyer should consider as a result of working with an agent.  In my opinion, packing it into the

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The Mortgage Interest Rate Customer TRAP

The Trap Is Set, Here’s What It Looks Like Banks and loan officers know what the consumers want…that’s the problem. For many people, the number one question regarding getting a mortgage is always “What’s the current interest rate?” This is no secret to banks and loan officers, both of whom have a job to do, to get you to use their service to get a mortgage, so they can get paid.  Interestingly enough, loan officers and banks will typically advertise attractive financing terms and even potential interest rates as their method of attracting customers, oftentimes without telling customers the full truth behind them. That said, the trap is set; the conversation around the interest rate.  They know that the majority of people don’t ask about things such as “fees” and “points,” but rather the “interest rate they’re gonna get,” and loan officers know they can say whatever they want, hence…the trap. How Does The Trap Work? Here’s how you identify the trap and how to avoid it The trap is set right at the beginning, the moment you speak with a loan officer, but interestingly enough, it’s not the loan officer (or the “bank”) who sets the trap, it’s YOU who sets the trap! “What is your interest rate?” you blindly yet confidently ask as though this were a valid part of obtaining a loan.  The truth is, whatever interest rate you’re told at that moment will likely not be the interest rate you’re going to receive. Even worse, you can even ask them to put it into writing and it won’t matter.  The interest rate you spoke about is not something that can be provided to you even weeks after your initial conversation. The loan officer (and “bank”) are well aware of this and it opens the door for a “fraudulent” conversation.  It’s really up to the loan officer as to how honest they want to be or not to be.  For example, the loan officer can quote 1 or even 2 percent less than what is being told on websites and media outlets which will obviously attract your attention. Despite quoting this unicorn interest rate, the loan officer knows that there’s no way to call them out on this.  Time will go by before the interest rate can be provided, and by then “the market has changed, it’s a different rate today than it was when we first spoke.” THE TRAP HAS HAPPENED! Now you’ve been working with this person for weeks and have provided plenty of sensitive information to that person and have had your credit score affected since your credit needs to be pulled as part of the process, all for what you thought was a true interest rate…which you will not actually get until you perform what is called the “Rate Lock.” What Will My Interest Rate Be? An excellent question that is answered well into the transaction Earlier you may have read that asking what your interest rate will be is a dangerous proposition, but now that you’ve caught up as to why, we will revisit the same question, but from a different position. Asking a loan officer what your interest rate will be is incorrect since you now know that it’s tied to something called a “Rate Lock.”  The rate lock is the point of the loan transaction where you actually get the opportunity to select your interest rate, to a degree. The rate lock occurs when you’re nearing the completion of what the bank needs to issue you the loan.  It’s actually considered something called a “condition.”  A condition is a bank-required request of information from you that must be completed.  To complete your loan process, you will have to complete many conditions which the bank will communicate to you. So then the question becomes “why don’t I just get a rate lock immediately?” The answer is simple; the rate lock has an expiration date, generally 30 days.  So in other words, if you don’t complete what’s necessary to secure the loan within 30 days of getting your rate lock, then you will either need to pay a heavy fee to extend the rate lock (generally only a week or two), or, accept whatever the rates may be at that current time instead.  This is why people will wait until they know they’re almost complete with the bank before locking their rate. So earlier I mentioned that when you do a rate lock, you can “select your interest rate, to a degree.” What does that mean?  When it is time for you to do your rate lock, your loan officer will tell you what the interest rate is so far for the day.  You can choose to take that interest rate, or, you can wait until the next day to see if it gets better.  Talk to your loan officer about this, sometimes it gets worse as days go by, and sometimes there is some news people are waiting on that will affect interest rates in the near future, but whatever the case may be, you have the ability to choose in that regard. So What Is My First Conversation? The true conversation to have with a loan officer Your first conversation with a loan officer can be asking what the interest rate currently is, but now you know that it’s not really solid information, but more conversational.  The real first conversation to have will include asking them what their bank fees are.  Let the loan officer detail what type of bank fees they have.  Ask them about any credits they can give back to you as part of the loan.  You should be able to get back about $500 worth in fees by asking, and if they say no or that they do not, then you can consider asking other loan officers if they do. Remember, you now know that you can’t control the interest rate conversation, but you can certainly try to get a little of it all back

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Being A Successful Buyer In Today’s Market

Becoming A Powerful Home Buyer – NOW It’s time to rise above the other ordinary home buyers Becoming the most powerful home buyer(s) takes work and dedication.  Why?  Because other buyers out there aren’t going to put in any work or dedication!  Remember, it’s always the ones that stand out that stand tallest.  …okay, maybe I just made that up…but it makes sense! In addition to putting in work and dedication, having the correct mindset according to the current real estate market is incredibly important as well. In this blog, I am going to go over what “work” translates into, what “dedication” translates into, and what type of mindset you should have as well whether it’s a “buyer’s market” or a “seller’s market”.  Let’s get started! One Part Work; One Part Dedication You put in the correct effort and it will all go your way Work and dedication.  If those words have you cringing then you already understand why so many buyers fail before they begin, or worse yet, fail while they’re trying to buy their property. Getting the proper real estate agent to help you with your property purchasing journey is an absolutely critical component of the process and will reduce significantly the amount of work that you have to do.  You can CLICK HERE to visit our Home Buyer learning page to see what we do for our buyers and how we make it the best experience possible for you. Work: Let’s face a very real fact; buying a property is one of the largest transactions in a person’s life and it should be treated as such.  Buying a property is a big life step and is not to be taken lightly.  There are many steps to the journey and once you’ve succeeded, you’ll be bound to a lifetime of memories and the anticipated building of equity and wealth. Dedication: You have to be ready to respect the process and to prepare mentally, there are going to be highs and lows, there is going to be excitement and disappointment, and you’re going to experience it all…and if you don’t, then you either got very lucky, or you voluntarily backed out of buying for any variety of personal reasons. So now let’s get to the major points and get you ready to get out there! Understanding Your Housing Needs The beginning path, where you find properties that best suit you This is the very beginning part of the process and is oftentimes the simplest.  Grab your smartphone and/or go to your laptop or tablet and begin visiting the popular real estate websites.   The first thing you’re going to want to do is figure out the types of properties that you’re most interested in according to style.  Do you like a Colonial style house?  How about a Ranch style house?  Maybe you’re more of a 2-Family house? Perhaps you’re into a beach Bungalo or how about a small to medium Cape, heck maybe even a mansion? Whatever it is, you’ll quickly determine this for yourself as you browse the different homes currently listed for sale. Going forward from there, you need to determine how many bedrooms and bathrooms you will want and then how many you will need.  Remember, in many cases, price follows these two parameters closely, so if you’re focusing on price, then you’re going to want to be careful here. Next up you should take note of the towns you’re interested in the most.  Watch the home prices you’re seeing in those towns you’re interested in. If you’re finding that the homes that interest you most cost, for example, $600,000 but you feel your budget is set for $525,000, then your best bet is to change your parameters.  I understand that negotiating price might be a thing (more so if a buyer’s market, less so if a seller’s market), but keep in mind that you don’t want to start from a point of weakness, you should always start from a point of strength, having the right budget is strength. The Pre-Approval, Down Payment & Closing Costs The pre-approval letter tells you what your budget truly is A mistake many initial home buyers make is to assume what they can afford.  What they feel they can get will almost always be far different than what a bank calculates their affordability to be. Why would that be?  Remember the great crash of 2008?  Yeah, that was the bank’s fault.  The banks were giving mortgages to literally everybody, including animals and the deceased (for real).  Debt-to-income ratios were not thought about, income was oftentimes fabricated, and the types of mortgages being offered were (at the time) deemed legitimate and safe. Welcome, to the crash. Today things are far, far different.  The banks are much more protective of how much they lend and are far more interested in income and debts.   I can’t tell you how many times I’ve heard people say “I can get a mortgage easily.  I make $200,000 per year!” but what they don’t realize is that however much someone makes in a year guarantees nothing, especially if the bank calculates what they owe each month versus what they earn to cause them to be pre-approved for far less than anticipated. The next common statement is “I have a 800 credit score! My “Carma Credit” score says so!” which is equally as cringy since the only credit scores that matter are your FICO scores (a great way to discover your FICO scores are at www.MyFICO.com). So how does the bank do it?  How do they determine your pre-approval amount? The bank will collect (at the very minimum) the following documents and information from you to determine this: Last 2 Years Tax Returns Last 2 Months’ Paystubs(Or equivalent time of other legal income sources) The last 2 Months of Bank Statements Social Security Number Driver’s License(s) From this information, the bank will understand your income, monthly debts, and how much money you have for down payment, closing costs, and

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“Comps” Why Is It Such A Dirty Word In Real Estate?

By The End Of This, You Will Understand How everyday people view “comps” and what it means to them If you’ve ever had any interest in either buying or selling a piece of property, you can bet that the word “comps” has either crossed your mind, or, have been something you automatically think to produce. But let’s take a moment and think about what “comps” are and more importantly, where “comps” came from in the eyes of the general public. Pt 1: “Comps” & “Commissions” The Dynamic Duo Introducing the public to reality real estate TV shows The public is deeply in love with the idea of real estate and the sheer number of real estate reality TV shows reinforces this. With the click of a TV remote, a tap of a phone screen, or a tap of a laptop mouse, anyone can become immediately immersed in the world of real estate reality TV, and this is no surprise to anyone since reality TV shows have been ragingly popular for the better part of 3 decades now, so it does make sense that real estate reality TV should see its success as well. The issues begin when the watchers of these scripted shows begin to believe what they see and hear from within them. In shows like these, the premise is generally the same: – Main Actor(s) are met with a challenging property / buyers / sellers– Main Actor(s) are faced with a difficult related decision they must solve– Main Actor(s) are attempting to uncover a selling / buying price– Main Actor(s) are “in trouble” but use “comps” while poorly defining them– Main Actor(s) miraculously discover a resolution, at the right time!– Main Actor(s) ride(s) off into the sunset with huge commissions Within that recipe of a reality show, the real estate element will almost always call for “Commissions” and “Comps”.  These are the “bread and butter” of real estate reality TV. Rest assured, these “Commissions” and “Comps” are faker than a $3.00 bill. Commissions – Big numbers bring big ratings.  Imagine if you were a real estate show where the commissions or agent income were the national average…no one would tune in to watch the show.  So these numbers are artificially inflated and are scripted to grow viewership. These absurd “commissions” that get flashed on screen are outrageous and are there solely to “wow” an audience and the word “comps” is immediately recognizable as the major staple of the show, and therefore likely the driving factor for many reality show viewers.   Source: National Association of Realtors / NAR.realtor Comps – Is a shortened way of saying “comparables.”  This is another term that is recklessly tossed around in both reality TV and among everyday people.  When attempting to forecast the present (or even future value) of a property, “comps” are the main source used to do so.  The problem is that reality shows have bastardized this word, so much so, that anyone and everyone firmly believes that they are capable of “comp’ing” properties at their discretion. But what does it mean to “comp” a property in actual real estate terms? Veteran Licensed Real Estate Professional Charles Bianco produces comps in the form of a 15-20 page report that fully details the true value of a subject property.  This report will include, for example, sold properties within the last 6 months that match the subject in terms of interior and exterior square footage, amenities, upgrades, condition, utilities, geographic location and range, schools, equal number of bedrooms and bathrooms, property type (according to building codes) and more. You’ll notice that what he does not cover “what the neighbor listed for” or “what the guy around the block is selling for”, these are not comparables and they are not valid.  We feel bad for the most are licensed bank appraisers.  They are the ones who are being “stepped on” whenever an ordinary homeowner (or unlicensed individual otherwise) feels that they can “comp” their property or a property of interest.   Pt 2: So Then Who Does The Public Turn To? A hero had emerged, or so people had thought… There is an obvious need for information when it comes to real estate, especially since we’re focusing on what may be the largest transaction of many people’s lives…how could there be so few “reliable” resources and choices for people in this area? Since the internet came into existence, there has always been any number of websites touting themselves as the “go-to” website for real estate.  Many have come and gone, but one has always stood out the most, Zillow. Zillow has proven itself to be the #1 real estate information website in the United States and with tremendous financial backing, their having gone public on the stock market, and thousands upon thousands of real estate agents who pay monthly to be a part of the website, it’s no wonder that Zillow has such a hold on the real estate consumer public.  With that said, it’s also no wonder that the real estate consumer public holds their information as the gold standard, if only because whatever source would be considered second place, is a very, very, very distant second place by comparison. This does not mean that Zillow is without its flaws, however. In February of 2006, Zillow introduced the “Zestimate” to the public.  Zillow defines its “Zestimate”in the following way: “…A Zestimate incorporates public, MLS and user-submitted data into Zillow’s proprietary formula, also taking into account home facts, location and market trends. It is not an appraisal and can’t be used in place of an appraisal.” Sounds great, until you realize that the Zestimate does not accurately value a home on actual comparable parameters, it only values properties based on information which is subject to error and its own internal algorhythms. As a result?  Zillow admits that its “Zestimate” and the information they provide is subject to error, and those errors can be significant. Source: Zillow.com | Zestimate Accuracy Stats The above chart was taken

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