Your Home: Real estate myths debunked

September 28th, 2016

The proliferation of real estate websites and blogs has certainly helped to educate consumers on world of real estate. It is amazing to me how readily available information is in this day and age. To this day, I still get emails and calls about a column I wrote three years ago about multiple layer roofs and how challenging they are to insure. What a trip!

Even with all of this information at our fingertips, there are still several real estate myths that exist today that need to be debunked.

So let’s get started.

1. We should price our home a little higher than fair market value to allow for negotiations. False. Pricing a home over fair market value only reduces the desirability and marketability of your home while at the same time reducing your buyer pool. On average, only 30 percent of the buyer pool is willing to consider a home that is 10 percent overpriced. That means by overpricing your home, you have eliminated 70 percent of the buyer pool. How many buyers do you think would be willing to consider a home that is priced at fair market value? Many more, right? The more demand that you have for your home typically means that you will earn top dollar when it is sold. Isn’t that the goal? The only market that allows for slight (and I mean slight) overpricing is a strong seller’s market where demand is outpacing inventory. In this case, sometimes appreciation will catch up with you and justify your over fair market price. This scenario is not present in today’s market, however.

2. We just need to find the right buyer. False. Yes, it only takes one. But if you plan your marketing and pricing around only one specific buyer, you are probably excluding someone. Usually I hear this statement when a seller would like to overprice their home or not address a condition challenge. Or it could come up after a home has been on the market for a period of time and a price adjustment is warranted. Although it only takes one, I think the goal should be to find more than one. When you only have one buyer, you have to negotiate with only them and you don’t have much leverage. When you have more than one interested party, you have a lot more options. And you have the leverage. Price and condition must be in line with one another to set yourself up for a high demand sale.

3. A Realtor’s job is to show me every home out there in my price range. I need to see them all. False. This statement could not be further from the truth. When you go to the doctor with a medical problem, would you rather the doctor ask you a couple of questions and then give you a list of possible cures based on his limited information, or would you rather he ask you lots of questions and then thoroughly diagnose the problem and provide the cure? The latter right? Of course. A Realtor’s job is to schedule a thorough buyer’s consultation with you in which they will dig deep to find your motivation and what it is you are truly looking for in a home. Then they will have the information they need to show you only the best the market has to offer. If your Realtor signs up to be a glorified tour guide and just shows you everything out there, it is going to become a frustrating endeavor for the both of you. We always say that most Realtors ask a few questions and then show you 50 homes hoping to find the right one for you. Our team would rather ask you 50 great questions to ensure that we find you the right home and only show you the best the market has to offer.

4. Once I find the right home, I will get pre-approved with a lender. False. Proper financing must be in place before you start looking for a home. The pre-approval process helps to determine what price range you are comfortable with based on an estimated mortgage payment. This gives you the confidence that you are looking in the right price range based on your budget. In addition, pre-approval positions you to compete. If you find the right home for your family and then you have to take a pause to get pre-approved, you may run the risk of someone else seeing what you see in the home and writing their own offer. Then all of a sudden you are in a competition, or you may just lose out all together if you don’t move fast enough. Finally, an offer without a pre-approval isn’t worth the paper it is written on, so please take the time to secure your financing before you step into your agent’s car.

This post originally appeared in 2015.

Your Home: Edging nearer to another rate increase

September 19th, 2016

The New York Times recently quoted Janet Yellen, the Federal Reserve Chairwoman, as saying, “In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.” This pretty much says it all. As with anything else in the markets, no one has a crystal ball to predict exactly when the Fed will yet again increase the federal funds rate. But the writing is on the wall.

So what are they waiting for? Here are a few key factors that the Fed has identified to justify another increase in the federal funds rate.

Unemployment below 5 percent. Well you can check this one off the box. As of August, unemployment was at 4.9 percent and has been at or below 5 percent since October 2015.

Steady job creation. The most recent jobs report, although not as strong as predicted, did show that American employers added 151,000 jobs in August. Again, although this number pales in comparison to June and July’s job growth, the overall trend is still healthy according to the Department of Labor.

Income growth. This one was evading us, that is until the US Census Bureau released numbers just this week showing that the median household income has gone up for the first time since 2007. CNN Money, in a piece called “The Middle Class Gets a Big Pay Raise…Finally!” said that according to the census numbers, median household income went up 5.2 percent in 2015 compared to the previous year. This income increase could allow families to increase spending which would help the economy to continue the current cycle of improvement and could even assist with inflation. The current inflation rate is less than 1 percent and the Fed target is 2 percent.

These are not the only factors the Fed is watching. As previously mentioned, they are also watching inflation and GDP (Gross Domestic Product). However, the aforementioned factors may be just enough to encourage the Fed to raise the funds rate.

Again, please remember that the Fed does not have direct control over interest rates. However, they do affect the federal funds rate, which is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis. As the federal funds rate goes up, this increase in costs incurred by the banks is naturally passed along to the consumer through higher interest rates.

I know, I know. It seems that we have been crying wolf about interest rates going up for years now. Yet as of today, the evidence or proof that the Fed seems to be looking for has never been more evident. As with the rest of the real estate market, you usually don’t know that you have waited too long to make a move or refinance at these low rates, until it is too late. It is most likely that rates will not get any lower. Please don’t wait to capitalize on historically low interest rates that will very soon be nothing but a sweet memory.

Your Home: Fall home checklist

September 15th, 2016

Getting your chimney cleaned is a must if you plan on using your fireplace this fall and winter.

Getting your chimney cleaned is a must if you plan on using your fireplace this fall and winter.

I am surprised every year when summer quickly turns to fall, and this year is no different. We are less than two weeks away from the first day of fall and it’s time again to discuss a few proactive steps that you can take to prepare your home for the change of seasons. Our Kansas City winter weather can come quick sometimes, so starting early can make the transition much easier. Many homeowners don’t start their fall prep until the temperatures drop and the fall rains come. In some cases this can be too late.

Here are a few tips to help prepare your home for the upcoming seasons:

Clean your gutters. I talk about this one a lot, yet this one maintenance issue comes up on almost every home inspection that we see performed. Gutter cleaning is a must going into the fall when we tend to see an increase in rainfall. Mainly because the soil around your foundation has just suffered through the hottest and driest summer months causing it to pull away from your exterior foundation walls. This contraction leaves your vulnerable to water intrusion when the falls rains hit. If your gutters are full at the time, you will see the waterfall effect allowing the rain water to fall right next to your foundation walls. The gap or space around your foundation then serves as a funnel, if you will, allowing water right next to the concrete, stone, or cinder block walls. And as water does, it will find the path of least resistance into your home. If you don’t like to clean gutters, like I don’t like to clean gutters, you can certainly hire it out. Many companies offer fall discounts and you can often get the whole house done for $150 or less.

Clean your chimney. It is important to have your chimney cleaned annually if you intend to burn wood or gas logs. Not only can creosote and other debris collect in your chimney flue, but bird’s nests and other unusual things can make their way into your chimney as well. Don’t skip this step if you use your fireplace at all. You would be surprised how many homeowners have had a flue fire at some time during their ownership and were not aware of it. That is a scary thought. Flue fires burn at such a hot temperature that if it were to escape your flue, the outcome could be disastrous. And hey, gas log people out there, you need to do this too. Cleaning your chimney is not just for the die-hard wood burners. For a real life example, one of our readers stopped me one day and thanked me for writing about this topic because after reading our column, she had her chimney inspected (a level-two inspection with a camera) and they discovered that she had recently had a flue fire.

Have your roof inspected. If your roof is getting older, it is never a bad idea to have it inspected by a trusted roofing company. A few years ago when we had long periods of snow on the ground, and quite a bit of it, I remember a wave of calls received from clients and friends concerning roof leaks. Roof leaks in the winter are typically caused by ice dams. This is when snow and ice collect at certain parts of your roof and then they freeze, thaw, then refreeze again. In between stages, the melted snow and ice find their way under roofing shingles or around nail pops in your roof. The result is at the least a very annoying water stain in your ceiling. However, if the ice dam is large enough, it can cause major water problems. A little roof buttoning-up can go a long way when it comes to preventing water intrusion.

Service your furnace. Don’t wait until the first cold snap to find out that your vintage 1957 furnace has decided to finally retire. If a major repair or replacement is needed, you want to give yourself time to explore your options and shop around. When it is freezing outside and your furnace does not work, you really don’t have the luxury of time at that point. Also, as it pertains to older furnaces, it is important to have them serviced and visually inspected to insure that there are no potential health risks such as a cracked heat exchanger which can allow carbon monoxide to be pumped into your home. Air quality is certainly important when we spend so much of our time indoors during the winter. The elderly and children can be especially susceptible in these cases.

Put away your garden equipment. This last one may be obvious, but I bet I throw away a frozen water hose at lease every other year. Hoses, gardening tools, gardening pots, and even patio furniture should be cleaned and stored for winter each year to extend their useful life. The cost for replacement may not seem significant, but over time it can add up.

Your Home: Signs that the shift is here

September 15th, 2016

Housing_Cycles

A few weeks ago I shared that we might be on the front end of a market shift. I have been waiting anxiously to see how August would end up. Well, the results are in and the market shift continues.

So how can anyone predict a market correction, or in this case, a downturn? I was told a long time ago that you can never time the market. Usually you don’t know that a shift is happening until it has already happened.

What we can do is examine the contributing factors to a downturn in the market. Before I go much further, by downturn I do not mean recession. Our market shifts, or corrects, itself on a pretty regular basis. A healthy market should correct itself to prevent what happened in the ramp up to the recession. During the early 2000s values continued to go up at an unsustainable rate while at the same time the lending world was changing its products to create opportunities for some people to buy who truly (in their best interest) shouldn’t have purchased a home. These same risky lending practices helped to prolong the period of rapid home appreciation, and then when values were just too high to sustain and the market corrected itself…well you know the rest. All in all, I am not predicting another recession. And at the end of the day, market corrections are necessary for long-term market health.

The goal of this column is to keep our readers aware of the current shift and to share how it will impact our real estate market.

So let’s look at indicators that signal a downturn in the market:

Days on market going up. Currently the average days on market in the Shawnee Mission area is not going up but rather it is holding steady. Since May, the average days on market has been between 25-30 days. We are keeping a close eye on this one.

Inventory going up. This one is happening for sure. We have jumped from 1.8 months of inventory to 3.5 months. This sudden increase has made August the highest level of inventory that we have seen in two years. Even higher than the previous two Decembers when inventory is historically at its highest point.

Prices are holding steady or dropping. From July to August the median sales price in the northeast Johnson County area has dropped from $213,000 to $202,500 (a 4.9 percent decrease). However, if you look at median prices since May they have been holding pretty steady with the exception of August.

Sales are dropping. The number of homes that went under contract in July was 334. So what about August? Only 202 homes went under contract in August. The last time the number of contracts was that low was December of 2015.

Construction is flat. For this indicator, I looked at Johnson County as a whole for my research. From June through August, the number of new construction homes has ranged from 604-628. This is only a 4 percent increase and at this point it is a little too early to see if long term this will hold static around this range.

So far we have confirmed three out of five indicators for a market downturn. With inventory sharply on the rise, it will not take long for the days on market to go up as well. We will continue to monitor construction trends for the last piece of the downturn pie.

Here are my takeaways:

  • If selling your home is inevitable, I would do it as soon as possible. That is unless making less on the sale of your home further down the road is an option for you.
  • Unless something very atypical happens to help absorb the additional inventory that we are seeing now, spring 2017 will not be as “hot” as spring of this year. Don’t count on an auction-like environment similar to the first and second quarter of 2016.
  • Buyers, please don’t get cocky. I don’t want the buyers out there to read this column and think, “Ok. I will just wait until next year and maybe it will be a buyer’s market again.” Maybe it will, but it is too early to tell. And regardless of whether it is a buyer’s market or a seller’s market, the gift of today’s market to a buyer is interest rates at or below 4 percent. Don’t miss the opportunity to leverage yourself with historically low rates. They won’t be around forever. Just recently, Janet Yellen, the Fed Chief, hinted in a speech (according to Bloomberg News) that a stable August jobs report may be just enough to cause the Fed to consider a rate hike at their September meeting.

MarketDyn

Your Home: You deserve more

August 29th, 2016

Simply stated, as a selling client, you deserve more. My industry gets a bad wrap quite a bit, and a lot of it is self-inflicted in my opinion. Our job is to provide great service and great results for our clients. But what do great service and great results look like? Let’s start with what the National Association of Realtors tells us is our fiduciary obligation to our clients.

Once we have been hired by someone to be their agent, NAR states that we owe the following fiduciary duties:

  • Loyalty. This duty obligates a real estate broker to act at all times solely in the best interests of his principal to the exclusion of
    all other interests, including the broker’s own self-interest.
  • Confidentiality. An agent is obligated to safeguard his principal’s confidence and secrets. A real estate broker, therefore, must keep confidential any information that might weaken his principal’s bargaining position if it were revealed.
  • Disclosure. An agent is obligated to disclose to his principal all relevant and material information that the agent knows and that pertains to the scope of the agency. For example, an agent must disclose all offer received on a property for sale whether they are in writing or just a verbal offer.
  • Obedience. An agent is obligated to obey promptly and efficiently all lawful instructions of his principal.
  • Reasonable care and diligence. The standard of care expected of a real estate broker representing a seller or buyer is that of a competent real estate professional. By reason of his license, a real estate broker is deemed to have skill and expertise in real estate matters superior to that of the average person.
  • Accounting. An agent is obligated to account for all money or property belonging to his principal that is entrusted to him.

The aforementioned are the fiduciary duties owed to a client. Consider them a starting point. As a client, however, don’t you deserve more than the minimum standard of conduct? Of course you do. You deserve much more.

You deserve a full-time Realtor. I myself was once a part-time Realtor as I transitioned into the real estate business from the food service industry. Because I have been both part-time and now full-time, I understand the time it takes to stay fully informed of the market and to provide great service. You can’t serve two masters. They say that for a reason. You deserve a full time Realtor who is dedicated solely to serving his or her clients.

You deserve professional photographs. Holy cow! Is this one basic or what? There are even websites dedicated to making fun of bad MLS photos like www.badmlsphotos.com. We know that your first showings are online, not in person. Your first impression is everything and may determine whether or not a potential buyer chooses to schedule a showing to actually see your home in person. The cost of professional photographs is not worth the risk of loosing a potential buyer. In my opinion, it is one of the smartest investments a Realtor can make on behalf of his client.

You deserve professional staging. Although there are a select few agents who have a great eye for staging, you deserve to have professional staging services when preparing your home for sale. There is a tremendous amount of perspective provided by a third party whose sole purpose is to make the seller’s home as marketable as possible. And it takes all of the guess work out of the home staging process. Every seller’s time is valuable and, therefore, each seller should be provided with a detailed list of specific staging suggestions to help maximize their home’s value and make the best use of the seller’s time.

You deserve not to work with someone just because they are a friend, a relative, a fellow church member, etc. Please don’t take this one the wrong way. I celebrate loyalty as it pertains to our clients. However, I don’t expect them to be loyal to me, but rather to be loyal to our level of service and our results. Oftentimes sellers allow a friend or family member to guilt them into hiring them even when they would prefer not to. Here is the way I see it: Go ahead and interview your friend and also interview other Realtors as well. Then choose the one with the best proven results (i.e. lowest days on market, highest list price/sales price percentage, fewest number of price adjustments, etc). If your friend gets mad because they don’t get the job based on a factual comparison of the results, then that friend is more concerned about themselves than they are about what you deserve as a seller. What was that first duty again? Loyalty, to the exclusion of all other interests, including the Realtor’s.

An unprofessional interior photo...

An unprofessional interior photo…

...and a professional one.

…and a professional one.

Your Home: It’s time for mom and dad to sell

August 29th, 2016

Over the last five years or so we have had the privilege of assisting several clients in the sale of their parents’ homes. I, for one, have a soft spot for seniors, so I could sit and listen to them reminisce about all of their great family memories in their home for hours. It is an honor to work with a family as they close the chapter on a family home and a responsibility that I do not take lightly. In many cases, I have sat in the cozy living room of a home surrounded by family photos with tears in my eyes as the husband or wife shares with me how hard it is going to be for them to leave their family home. Yet, in most cases, I know in my heart that the family knows that the move is in the best interest of their aging parents, and our team is there to make the process as easy and stress-free as possible.

That all sounds great, but honestly it is hard. In most cases, selling a family home can be a hard change for the parents and kids alike. Even when all are confident that it is the best move for the parents. So where do you begin? I wanted to offer a few thoughts on this delicate subject that may help along the way.

  • Don’t wait until it is too late. In many cases, elderly home owners have established a set routine in their current home and the thought of a major change at this stage in life can be daunting for the entire family. This line of reasoning can cause the family to keep their family member in their home for too long. How long is too long? Too long is when the health or strength of the aging family member is such that the condition of the home is suffering. For some families, when the upkeep becomes too much for the family member, this is the catalyst for the conversation about a potential move. Too long is also after a catastrophic health event occurs that causes the family to sell the home in a rush. In this case, families may have to cut corners as it pertains to conditioning in the essence of time which will have an effect on value. Additionally, an urgent health event could affect the family’s ability to give careful consideration to pricing the home appropriately. If funds are needed quickly to offset medical costs and such, some equity may be left on the table in a rushed situation.
  • Know where your family is going. In my experience, before an elderly homeowner can conceive of selling their current home, they have to know their destination. The fear of the unknown can be paralyzing for any seller, especially a senior one. Having a clear picture of the patio/villa, retirement community, or assisted living facility that your family member will be moving to will also help the family when thinning out furniture and personal belongings. In most cases, this is a down-size move and thinning is probably an understatement. This thinning process takes time and having an end game can take a lot of the anxiety out of the move.
  • Start early. In many cases, a move for a senior family member can take months or even years. I have found that the earlier the conversation is started, the easier it is for all parties involved. Early conversations allow for careful consideration and much needed communication as to why the time for a move is now inevitable. In some cases, a sibling can be the hold-out for selling a family home and you won’t know it until the family starts to talk about it. You don’t want the hold-out in your aging parents ear without the other family weighing in. Open communication between family members is a step in the right direction especially because most seniors have to make the move psychologically before they can physically make the move.
  • Go out on a high note. This goes back to the discussion of not waiting too long. This is my personal opinion, and I don’t ever like to “should” on someone, but here I go. Nothing breaks my heart more than to see a senior seller who is embarrassed by the condition of their home and the lack of upkeep has become a daily reminder of their physical challenges. It breaks their spirit, I think. When I look back on my career, the most stress-free and I would say happy senior moves that we have helped with have been the ones when the seller leaves the home with pride knowing that their home is still in tip-top shape. It is a graceful transition for them and one, I feel, they have earned.

If your family is in the beginning stages of similar conversations, or are in the middle of the process, and you have questions about the next steps, please do not hesitate to call or email me directly. I would consider it an honor to help your family.

Your Home: 2017, it’s no 2016

August 29th, 2016

It is hard to believe that we are in full-swing back-to-school mode at my home already. New shoes have been purchased. The boys have their back-to-school haircuts and I am excited to get back to my daily walk to Prairie Elementary to drop them off in the morning. Back to school has additional significance when it comes to the real estate market. Historically each year, the housing market takes a little pause for a week or two when school gets back in session. And then it kicks right back into gear. In 2015, October was a record month for our team, so it can be a pretty significant kick.

The next few months are going to set the stage for the housing market in 2017. So let’s take a look at some national trends and then we will look a bit more closely at our local market.

Screen Shot 2016-08-12 at 11.42.00 AM

As you can see, homes sales nationally have already outpaced total sales from 2003 and are on track to potentially rival 2004. Overall home sales are still setting records for the post-recession market. However, sales are slowing in some markets due to an unsustainable increase in home values. We have seen some of this push-back in our market in certain price ranges and neighborhoods. For a while, the demand has been justifying the big jump in home prices, but as demand lessens, downward pressure on pricing is present. The number of price adjustments has increased as of late as well as average days on market.

Screen Shot 2016-08-12 at 11.42.16 AM

National home prices are projected to peak well above 2006 values by the end of 2016. Sustainable appreciation in overall home values is a good thing. As long as they are in the sustainable range of 4 to 6 percent. So far, the national numbers have stayed in that range. However, as values continue to rise and income growth does not, this will create a problem at some point. And it is important to know how your local market is competing in comparison to the entire city or the national real estate market. Kansas City, for example, is predicted to see slightly more than 6 percent appreciation this year and saw a similar gain last year. So we are just outside the sustainable range which puts us on notice of a possible shift in the market.

Now let’s take a look at our local market. For this example, I am going to use Prairie Village. I chose Prairie Village because I often hear comments like, “It is always a hot market in Prairie Village,” or, “With all of these tear downs going on, clearly the market is strong in PV.” Both comments have some truth to them, yet no city or neighborhood is completely insulated from a shift in the market.

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As you see here, in December 2015 we ended the year with only two months of housing supply available. This means that it would only take two months for all of the available homes to sell. Two months of supply is a strong seller’s market and that occurred in what is supposed to be the worst time of year to sell. This lack of inventory started 2016 off with very little housing available. The lack of inventory coupled with high demand created a vacuum, of sorts, which resulted in bidding war after bidding war. Fast forward to July 2016 and you can see that we are at 2.5 months of supply. That is higher than any point in 2015.

I am not trying to convey a doom and gloom message about the real estate market. I will say that based on current inventory levels and the fact that historically inventory will continue to increase throughout the remainder of the year, 2017 will more than likely not be as frenzied of a market as 2016. More inventory means more options for buyers which typically causes prices to get more competitive as well. Therefore, if you are waiting until Spring of next year to sell, thinking that it will be just like spring of 2016, you may want to rethink your plan. An increase in inventory caused by a drop in sales is one of the first signs of a market shift. We could be on the front end of a shift as we speak.

Your Home: Pre-inspections – best money a seller can spend

August 11th, 2016

One of the most joyful times for a home seller is when they get word that their home is officially under contract.  The moment right after that is when the fear sets in for most of them.  Fear of the upcoming…dum, dum, dum – whole house inspection.  That’s right, most sellers fear what the home inspection will uncover and that their beautiful home will be picked apart by the home inspector and his or her team.  Oddly enough, most buyers are also quite nervous about the home inspection.  What if the home that they are in love with turns out to be a lemon?  What if skeletons in the closet are the least of their worries?

The best solution for eliminating anxiety from the inspection process is a pre-inspection.  I have mentioned them before, yet I don’t think that I have given them enough credit for ensuring a smooth sale.  A pre-inspection is a whole house inspection that is completed prior to a home going on the open market.  Once the pre-inspection is completed, the listing agent and their client can then sit down and prioritize the repairs that must be done in order to ensure a smooth sale.  We usually target any active leaks, safety issues (electrical issues, carbon monoxide risks, etc.), structural concerns and the like.  The goal is to identify the items that any buyer would want fixed, and then fix them prior to listing the home for sale.

 But aren’t you just opening a can of worms by doing a pre-inspection?  No. The buyer of a home will most likely complete their own home inspection.  And when they do, their home inspector will more than likely find a similar list of items to those that the pre-inspection uncovered. The difference is that when a seller uncovers needed repairs during a pre-inspection, they can be proactive with the repairs and they remain in the driver’s seat.  When a buyer discovers deficiencies during their inspection, they are now in the driver’s seat and will do their best to get as many repairs completed by the seller or perhaps a credit towards repairs.  The major difference is that the buyer is making repair requests of the seller after the seller has perhaps already negotiated the sales price of their home.  When repairs are made from a pre-inspection and the home is marketed as pre-inspected, the pre-inspection then helps to defend the list price of the home. 

 Here are some other benefits to a pre-inspection:

 Higher bids for the home.  In a multiple offer situation, we have found that buyers are willing to bid the price up more aggressively when there is a pre-inspection because they know what they are buying and they have a clear understanding of the overall condition of the home.

 Fewer surprises.  I learned at Houston’s many years ago to never surprise your boss.  Once your home is under contract, the buyer is kind of like the boss.  You don’t want them to be surprised by some unexpected defect with your home.  This surprise could have an adverse effect on negotiations, or even worse, cause them to cancel the contract.  The seller then gets to go back on the market, but this time with a black eye.  Future buyers will wonder why the first buyer cancelled.  Regardless of the reason, the seller has lost leverage at this point.

As-is – two very sweet words to a seller’s ears.  We have been performing pre-inspections on our listings for almost 3 years now and in many cases, a buyer has accepted a home as-is or in its present condition.  They may choose to perform their own inspection just to get another perspective, or they may not.  Either way the seller is not responsible for any further repairs.

Good faith.  A seller who provides a pre-inspection on their home is in my opinion operating in good faith and is going above and beyond.  I am a firm believer that you get the energy out of the sale that you put into it.  A pre-inspection is good energy and starts the buyer/seller relationship off on a good note. 

Limited opportunity for recourse.  Pre-inspections which are disclosed to the buyer prior to contract almost eliminate the argument that a seller failed to disclose – in the event that something fails on the home after the sale is completed.  I am not a lawyer, however, it seems to me that it would be hard to argue that a seller withheld material facts about their home when they provided the buyer with a fifty page pre-inspection.  The rule for all sellers should be “when in doubt, disclose.” A pre-inspection coupled with a thorough seller’s disclosure statement should certainly eliminate any doubt.

 If you have any questions about the pre-inspection process or would like a referral for a great inspection company, feel free to email me or call me at 913-825-7540.

Your Home: The election and the housing market

August 1st, 2016

What an exciting couple of weeks it has been. Both Republicans and Democrats have had their week in the limelight. And because of it, I have almost had to avoid social media. The polarizing positions of both sides of the aisle have brought out the worst when it comes to passive-aggressive posts to social media. They are like little unsuspecting landmines in my news feed.

Truth be told though, I am a political junkie. I just can’t get enough of it. I am fascinated by both parties and their processes. Just ask Leah. I have recorded all four nights of both conventions because I want to hear all sides of every issue facing our beautiful country. After all of my years of watching elections, debates, and conventions, I am shocked at how dramatically different both political platforms are on pretty much every issue. I mean polar opposites. Even for an old school political junkie like myself, it is a little disconcerting. So how does that affect the real estate market?

Historically, elections do have a direct effect on the markets. The more uncertain the outcome, the stronger the chance that the markets will take a hit. This year, not only is the election outcome hard to predict, but the proposed policies of the two candidates could not be more different if they tried. Sounds like uncertainty to me. “This election, we’ve got a lot of uncertainties. And if there’s one thing markets hate, it’s uncertainty,” Mary Ann Bartels, Head of Merrill Lynch Wealth Management Portfolio Strategy. recently said.

As I read about this topic, I was not surprised to find that during election years when the incumbent president was running for office, the markets did not take as big of a hit. This is the case regardless of the political party of the incumbent. Fascinating, right? But not surprising. In most cases, people don’t love change. Even if the incumbent does not align with your political views, at least he or she is predictable in a sense.

In recent conversations I have heard people say that the markets like it better if a Republican is elected versus a Democrat because Republicans are better for business. Again, when I researched this topic, I found it to be quite untrue. Especially in recent history. Change is change, and remember that the markets don’t like change.

I bring this year’s election up because number one, everyone should go and vote on election day. And not just presidential election day, but also for local and state elections. And two, yes the real estate market may very well be affected by this year’s election. As we near the election, the slow shift in our market that we are currently seeing could be intensified going into November. Seasonally we historically see a lessening of demand and an increase in inventory going into the holiday months. As we build up to the election, this shift could come much sooner creating opportunities in the market. Opportunities like more housing options for buyers, fewer multiple offer situations, even lower interest rates, and so on.

After three-and-a-half years of a highly competitive sellers’ market, the tides could start to turn. We are already seeing some signs of a shift and if you are looking to enter the real estate market in the near future, you might consider making election day your target for closing on your new home, or for selling your current home.

Your Home: Buy before you sell – why not?

July 28th, 2016

It is most common when a homeowner decides they need to purchase a new home that they sell their current home first and then go out and find their new home. But why? The answer is because that is the way it has always been done in the past. And because most homeowners need the equity from their current home to purchase their future home. So, in turn, they must sell their current home first, right? Wrong.

At our team meeting this week, we were identifying the reasons why some homeowners are not taking advantage of the current seller’s market even though a move is inevitable for them. Doesn’t it make sense to sell now instead of waiting? The consensus was that the number one reason for not selling today is the fear that a seller’s home would sell really fast. Seems like a great problem for a seller, right? But the real fear is not having a home to purchase when they do sell. The fear of being homeless, moving in with in-laws, or getting an apartment is paralyzing for some. So what is the solution?

In some cases, the solution may be what is called a loan recast. A loan recast is when a homeowner is approved for a loan without the sale of their current home. The homeowner then moves forward with purchasing a new home, again non-contingent upon their current home sale. A best practice would be that once a contract is in place on the future home, the homeowner would then put their current home on the market and get it sold as well. A loan recast allows the homeowner to close on their future home and then recast the loan once their current home closes and apply the equity earned from the sale to the new home loan. No, this is not a refinance or a bridge loan. Bridge loans and refinances both require a new appraisal to be completed and can involve double closing costs.

The reality of choosing to go this route is that you must be able to get pre-approved for a purchase without the sale of your current home. For some, this is a scary thought. Two mortgages! I don’t want to pay two mortgages! Well you shouldn’t have to. Let’s remember the original fear that we identified. It was that a homeowner’s current home would sell too fast. So why the fear of two mortgages? In a seller’s market, homes that are priced fairly and conditioned well will sell quickly. That is that. Mike Miles with Fountain Mortgage recently said it this way, “The current supply (low) and demand (high) can provide some insulation against the risk of having to make two mortgage payments.”

Here are a few additional benefits to a loan recast:

  • All original loan terms stay with the recast. A recast allows a homeowner to capitalize on today’s low interest rates and then maintain those same terms after they have recast the loan. Unlike a refinance, a recast eliminates the fear of refinancing at a higher interest rate further down the road.
  • The rate is the rate. The interest rate on a loan to be recast is the same as any other purchase loan in today’s market.
  • Time is on your side. When a homeowner sells their current home, the closing date is often times negotiated with the buyer. If the buyer is in a lease which is ending very soon, they may ask for a 30 day closing. If the seller accepts, this would not allow much time for the seller to find a new home, get it under contract, inspect it, appraise it, and so on. Conversely, if you purchase your future home first and then sell your current home, you can adapt to almost any closing date scenario. Even a cash purchase that closes in two weeks. Imagine the stress that this takes away from the sale. Time is also on your side when you make your purchase. In a competitive situation, you can allow the seller to determine their preferred closing date without any fear of lining it up with the sale of your current home. Again, the recast allows you the flexibility to adapt and compete.

Just this last week, we helped a great client of ours purchase the home of her dreams using this exact loan product. All the while she was following our program to prepare her current house for the market. Once she was under contract on her future home, we put her current home on the market that next weekend. Her home went live on Friday and by Saturday night was under contract. She knew that her current home would sell quickly, however, she was afraid that she wouldn’t be able to find a home that she would love. By purchasing first, she stayed in the driver’s seat on both her sale and purchase. And, by the way, we lined up her closing dates so she will not have one month of double mortgage payments.

If you would like more information about a loan recast program, please email or call me directly. You can also reach out to Mike Miles with Fountain Mortgage as well. We are here to help!