Paying a Broker to Sell Your Home Faster

One thing is for sure. Real estate agents are in the business of sales; and, salespeople are driven by the prospects of commission compensation. So, knowing this, why do many sellers try to hire the lowest priced agent? Think about it! Who will work harder, smarter, and more effectively than someone who stands to earn more as a result? You got it! The agent who is properly compensated will most likely get the job done faster, and probably net you more money in the sale process. In today’s competitive “Buyer’s” real estate market, commissions are ranging from 5% to 10% depending on the circumstances of the property. In the old days of the “seller’s” market, 4% commissions were very common. With all the homes on the market, what will be the differentiating factor that will cause more buyers to take a look? Bank Owned, Short Sale, and other distressed properties will be popular for sure. How then, can equity sellers get their homes sold? The key is paying the Broker to get the job done. The best Brokers will offer tiered payments to accomplish what you want. Some will even offer guarantees. If you have questions about how to craft your sale in a “market-smart” way, give me a call.

Why Now is a Smart Time to Buy Real Estate

The Wall Street Journal recently stated that buyers should take control of the current buyers’ market and flex their muscles by making the most of the power of their dollars. Not only is this good advice for first-timers, it is also good advice for investors. The advice is solid, but not revolutionary. Buyers’ markets have always offered these kinds of opportunities for those who are properly prepared to act. Smart first-timers will realize that what they buy is a place to live and not merely an investment. Lenders want buyers to minimize their gross monthly income dedicated to mortgage, taxes, etc. Buyers should not plan on stretching beyond 28-42% because lenders won’t approve the loan. Investors are going to need a strong debt coverage ratio of 1.25. Buyers should be in it for the long haul and expect to hold the property for 5-7 years. Buying now, is smart because interest rates are continuing to rise. Foreclosures offer particularly good opportunities to buy undervalued properties. Foreclosures are abundant and so are Short Sales. For details on available properties call 714-264-5964.

Will Interest Rates Refuel the Housing Bubble?

The Federal Reserve has been on a tear lately with interest rates. Could we be in for some of the same unintended consequences stemming from the aftermath of the 2001 stock bubble and the September 11th terrorist attacks? With the economy possibly heading into a recession, the Fed has been following some similar steps by cutting Fed funds rates in order to help revive the economy - partly by making home buying financially enticing. Will the same behavioral patterns emerge? There are, no doubt, significant market variations, but let's replay the key factors.
The Fed started cutting rates from 2001 and the mortgage rate fell by 2.5 percentage points by summer of 2003. ARMS fell from 7% to 3.5%. Housing demand rose, home prices accelerated, and inventory fell. Global capital providers were eager to provide financing, ratings agencies gave their blessing on subprime products, and no documentation loans proliferated. Then, from 2004, the Fed began to tighten and rates escalated. Buyers started to back away, flippers quit, inventory rose, and home prices began their decline. Fast forward to mid-2007. A lack of market liquidity and foreclosures forced the Fed to cut rates. Can it happen again? Probably not. Global lenders have been burned and are not going to make the same mistakes. Now it will take a lot more than a heartbeat to get a loan. Borrowing rules are more rigid. The good news is that buyers with income and money for downpayments will be able to get good deals on houses. Though, watch out for rising rates. What's your opinion?

Ignore the Headlines

Buyers would be smart to ignore a lot of the scary headlines regarding the condition of the housing market, and also the warnings telling them to wait before buying a home. Why do I say that? If someone is buying a home to live in, there are obvious tax advantages that compel them to buy. But, the biggest point to consider is: how long should a buyer wait before buying? Trying to time the market is futile, and guessing when it will bottom out is just as futile. Consider this. Let’s say a buyer wants to buy once the market drops another 10%. If today the home they want is $500,000, and they put down 20% with a 30 year fixed loan at 5.5%, the monthly P&I payment would be $2,271.16. Waiting a year the house will be only $450,000 but interest rates are likely to be higher; let’s say the rate becomes 6.25%. The payment next year would be $2,216.58 which is an annual savings of $655, but the lost interest deduction on $21,728.96 will easily wipe out any savings. So, tell me again why a buyer should wait?