Solving Real Estate Problems Part I: Down Payment

solving problems

The number one reason to hire a realtor is to solve a problem.  As I share the story I’m about to tell you keep that in the back of your mind as I share my client’s recent experience with a competitor realtor:   It’s year end 2018 and my clients were at a Christmas Holiday party.  My clients were enjoying the festivities when they met a competitor neighborhood realtor.  They shared with this realtor that they were still renters living in a duplex and were actively looking at single family homes for sale.  The competitor realtor asked them about their plans to buy real estate in 2019 so they replied that they were ” . . . actively looking for a seller that will accept a smaller down payment or that will accept the down payment assistance we qualify for.”  The competitor realtor was a bit surprised and said “well if you don’t have the down payment it will be hard to buy a house in this market.  Inventories are very tight.  You might want to just wait till you can save enough for the down payment and continue working on your credit.”  At first glance that sounds like great advice – right?  I would challenge that and tell you hands down – WRONG!  Whose problem did this realtor solve?  In fact, when my client asked my opinion of this advice I responded “well, do you feel the realtor solved your problem?”  They obviously said no, to which I then reminded them that like many services professionals, it’s not about the badge one wears but the person behind the badge.  I continued, “your going to meet realtors who have never found creative solutions to solving real estate problems.  They are so intently focussed on how they closed their last deals that they simply cannot think beyond that because of their fear that they won’t get paid.  And THAT, is really the problem that they are focussed on solving.  Not yours.”  On a bigger scale let’s take the situation with the Los Angeles (Anaheim) Angels.  The Angels don’t own Angel Stadium, the city of Anaheim does.  But that hasn’t been a problem for the Angels who, as a professional baseball organization are essentially renters.  Through all the options on leases and lease contracts that the Angels management must negotiate, agree upon and ultimately enter into, the Angels still find a way of showing up on game day to a packed crowd.  A lot of creative juggling, but they make it work.  On a smaller scale, my clients have done the planning that it takes to buy a home.  They know exactly what down payment they want to make and the down payment assistance they are going to use when they find a home they are excited about.  But they aren’t just focussed on the house, they want the deal that they want.  Not just price, but terms!  The competitor realtor’s advice lacked the focus to solve a problem and instead would have sent my away clients off confused and frustrated.  The real estate market is going to do whatever it’s going to do.  It’s not a controllable factor by any one person.  Therefore strategizing how a home will be bought or sold and if the timing is right is what buyers and sellers depend on when they work with a realtor.  Planning is essential in order to getting what the buyer (or seller) wants.  There are times traditional methods will work just fine and times when creative methods work fine.  Either way doesn’t really matter, so long as I’m solving my clients problem and they are getting what they want IS what matters.

If you know someone with a real estate problem or questions feel free to email Paul at his email address at buyorrentmyhomes@hotmail.com.

Paul Krause is a full time real estate professional with Keller Williams in Los Angeles California, DRE #01835890 and CSLB #1029575.

Sidelined!!!

Sidelined

You came really close to buying that house.  It had everything . . . except . . . RIGHT?!  Has this happened to you?  Everything about that home tour was going great until the agent said “oh don’t forget there’s no AC in this home,” and instantly you were turned off and heading straight for the door!  Although central air and air conditioning has become hugely popular amongst home buyers in almost region of the county, you found yourself looking at a home that was missing that one “thing” which killed your deal. Leaving you sidelined again.   This months infographic was excellent because as some seasoned homebuyers know, December can be one of the best months of the year to strike a deal.  There are a variety of reasons the “December Effect” exists.  The bottom line is that motivations to close a deal before year end the December 31st has caused more home buyers to find a deal in the slow, dark days of winter more than any month of the year.  Buying or selling, December is NOT the month to get sidelined!  As the graphic shows in Box 1, over 60% of home buyers put less than 6% down to close!  That reason alone can get any homebuyer off the couch and into this weekends next Open House.  Box 3 gives another example of judging a home just by it’s price alone.  Because of the “December Effect,” I always recommend homebuyers look at prospective homes regardless of listing price.  I know of a seller in Los Angeles that listed a home for more than $2 million as a For Sale by Owner that was offered cash of $900k and a very quick closing.  Instead of the seller being insulted or turning away they started negotiating the deal into the low $1 million range with the buyer.  Although the deal didn’t go through for other reasons, the point is most buyers would never think that such a low offer would even be considered.  And maybe that is true much of the time.  But this buyer learned by writing and submitting an offer the sellers motivation was substantial enough to negotiate the deal rather than turn away.  Don’t get sidelined this December!  The best home buying opportunity of your life could be one Open House away!

 

Avoiding Surprises!

 

It is so easy to fall in love with the “money shot” that it can cause a home buyer to forget how to evaluate a home purchase.  In real estate it is always emphasized that “location, location, location” is what counts.  And there is truth to that.  Which is why I wanted to share this home in my blog.  At first glance the home looks like an impressive compound.  It’s got that elegant “money” look to it.  So thanks to Google Space and Street View technology I was immediately shocked to find the front gate banged up and entrance featuring an old office chair prominently on display.  In addition the seller excluded photo angles that reveal a barren desert dirt front yard, which if I were to buy this property would end up becoming a dust bowl on a windy day – not uncommon for California!  The street view picture across the street is the neighbor across the street –  a home that is quite a bit different in dimension, style and size.  Which would lead me to ask “who would buy this property?”  Honestly there always a buyer for any home at the right price, but it is clear the featured sale property is well overbuilt for this neighborhood and is quite possibly the biggest and nicest in the neighborhood.  So how would that work out if you were currently the owner trying to sell this house?  Would you know someone who is willing to buy this home?  It’s possible.  If you want to avoid surprises one of the questions home buyers need to ask themselves is, if their situation changed would they want to be the one having to sell this house.  Again, there always a buyer for a home at the right price, but being that seller is easier said than done.  In high density city areas we can usually find plentiful comparable sales.  But in my experience the further your travel from urban sprawl the less information will I find for a given neighborhood.   That doesn’t bode well for buyers that need a loan to purchase a home if the bank has to stretch over many miles and calendar months of home sales to determine a fair market value.  A lack of sales data sure will make the sale of a property more difficult to compel buyers.  In this case, this seller might do just fine selling this beautiful home and find themselves having no difficulty finding a qualified buyer.  The point is as a buyer, you have to picture yourself as the potential seller first to ensure there are no surprises as a buyer.  Asking lots of questions about real estate trends in a neighborhood is something a competent and qualified realtor is happy to do.  In my case I even shake hands with the neighbors face to face by door knocking a few times a week just to keep up so that I know what buyers and sellers are not only doing, but where there thinking is so that new buyers get the best possible information to make an informed decision.  Avoid surprises by slowing down, taking a closer look, imagine yourself the owner and potentially seller first – this is a great way to avoid pitfalls and start your home buying process.

To get more information on purchasing a home and home trends feel free to write me at buyorrentmyhomes@hotmail.com.

Single Women Leading the First Time Home Buyer Charge!

Single-Women

Skip the spouse, buy a house.  Right?  Recently the National Association of Realtors found that single head of household females were outpacing their male counterparts in the first time home buyer surge going on across America.  The percentages from today’s infographic speak clearly to the fact that women value home ownership and are wiling to use a greater amount of disposable income to maintain housing ownership.  In Australia, woman are outpacing their male counterparts also because they no longer need a guarantor for they are encumbering against the home they are purchasing (https://www.westpac.com.au/news/money-matters/2018/02/women-holding-the-keys-to-the-housing-market/).  According to data released in 2006 by the Joint Center for Housing Studies at Harvard University, the three main reasons a single woman would buy a home are:
1. A strong desire to own her own home.
2. Needing more space or wanting smaller home.
3. Relocating closer to job, school or family.

And a 2012 blog post on Redfin revealed that women buying a home are more focused on whether they love it — 46 percent of women first evaluate a home based on this, compared to 24 percent of men. Fifty-four percent of women and 76 percent of men evaluate a property based on cost and value (https://www.huffingtonpost.com/2013/07/10/single-women-buying-homes_n_3573801.html).

I am all for more woman becoming homeowners.  Neighborhoods that are predominantly owner-occupied tend to be maintained better, safer and maintain higher asset values.  Want to learn more about becoming an owner for the first time?  Send me a message at paul.krause@kw.com Today!

The Biggest Home Buying Mistake – Timing versus Planning

SoCal median home prices

The headline read “U.S. stocks plunged to their lowest levels in nearly three years Monday, and the Dow Jones industrial average suffered its worst point-loss in history…”  That day in history was September 17th, 2001 (http://money.cnn.com/2001/09/17/markets/markets_newyork/).  Imagine trying to market time a stock investment the week before?  Whether your investing in stocks or real estate, planning is the process that prepares consumers for the possibility that timing works against them.  If you look at the chart above you can see how home prices in southern California topped out in July of 2007.  County wide, prices lost as much as HALF their values by April 2009 with the median home price finally recovering by 2017.  Good planning is how you get through the tough times so that your not forced to sell if the market sells off.  For example, imagine if you had purchased a house in June 2007 and then one of the following happened to you:

  1. Loss of a job/income
  2. Health emergency not covered by insurance
  3. Auto accident not covered by insurance
  4. Home repair not planned that drains savings
  5. Tax levy from the IRS or State taxing board
  6. Legal settlement not covered by insurance or savings
  7. Family emergency not covered by savings or insurance

I could go on with this list but each of these items can severely impact a homeowners ability to pay the mortgage.  And consider this, NONE of these factors are market related!   They are all issues that happen in LIFE.  It goes to say “Plan for the worst, hope for the best.”  Homeowners who carefully plan out the monthly payment including taxes and insurance are less likely to struggle during the tough times because they have “plans” in place to take care of such emergencies.   For example, private disability insurance can protect a homeowner from the possibility of becoming unemployed from a disability.  Drafting a will and living trust can make the process of losing a loved one a little more manageable to deal with a families daily affairs.  An umbrella insurance policy can cover owner liability and certain potential lawsuits claims.  Hiring a qualified CPA who is also designated as an enrolled agent(EA) can protect a homeowner from the potential conflict of filing a frivolous tax return.  Home warranty programs can cover home repairs that are costly and unforeseen.  The same goes with product warranties that are sold as “extended warranties” from resellers.  Boosting an auto policy coverage can ensure that an unforeseen accident doesn’t leave a homeowner in massive debt from health care bills.  This is just a short list of plans are designed to address unforeseen emergencies, not market pricing.  Yes it’s still possible to buy a home at the top of the market.  But, by working with a professional you can structure a plan to ensure that if the market turns, you still have a roof over your head, enough money to pay your mortgage and avoid being forced to sell your home.  Need a plan?  Contact me and I can help you get started!

Down Payment Assistance Through Grants, Part II

MR_Blast

I wanted to follow up my last discussion about mortgage assistance.  All week I have been speaking with potential new home buyers who have shared down payment affordability concerns.  The California Association of Realtors has recently shared this link which I want to pass on which can help potential home buyers with additional resources to find down payment assistance.  CLICK HERE:  http://bit.ly/2orSGPP

The Price is Probably Right

California-Hot-hi-res

In 2017 home prices in California were priced right at market more than 2/3 of the time.  WAIT?  Is that what this data is telling us?  Well . . . YES!  If you look closely at the percentage of homes in 2017 that sold above asking price was 32.9%.  That also means that 67.1% of the homes were price at or below market.  One of the greatest challenges for home buyers is feeling comfortable long after the escrow closes and the movers have left that the price paid for that new home was a deal.  Isn’t it?  For most homeowners their home IS the largest asset they may ever own in their life so it strikes home, no pun intended!  Although the data in this share today indicates California is getting to be a very warm market, at least for those that already did buy they can rest assure they at least paid a market price.  And if they didn’t, there was a good chance that another buyer right around the corner probably would have.  Unsure if now is a good time to buy or sell a house in California?  I can help!  Feel free to message me to learn about options that are available to you!