October by the Numbers

October by the Numbers

Presented as a public service by Joe Peters of Coldwell Banker

Homes are selling quickly, in an average of 31 days, and interest rates are still historically low. If you’re thinking of buying or selling a home, let’s connect and make these numbers work for you.


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Thinking of Carrying Back a Mortgage For Your Buyers?

Thinking of Carrying Back a Mortgage For Your Buyers?

Presented as a public service by Joe Peters of Coldwell Banker

Helping buyers buy and finance a home can be a way for you to earn some interest on the loan, much greater than what you can find at your local bank or credit union. Plus, the note you issue is secured by the real estate so if your buyers begin to default, you can begin the process of foreclosing and recovering your asset. For instance, buyers come to you and ask if you’d be willing to carry the mortgage for them. You agree and charge say 6.00 or 7.00 percent. You can make an interest only note or a fully amortized one. It’s your call.

Before we get too far into this discussion, depending upon the location of the property and local rules and regulations, you’ll want to work with a local real estate attorney to properly execute the note while retaining your interest. Further, should you decide you want to get into real estate investing full time and finance multiple notes, at some point you’ll be considered a lender and must follow additional guidelines. In other words, know before you go.

So why would someone ask you to finance all or part of the purchase? Typically because they’ve applied for a traditional mortgage and couldn’t qualify. That said, if a bank turned them down why would you approve the very same application?

If you are considering carrying back a mortgage, you’ll want to review the buyers much as a traditional lender would. You certainly want to get a credit report (a report that you pull, not one provided by the buyers.) You won’t have access to the very same credit report a lender would see but it’s close enough to decide.

You’re looking for current credit accounts that shows activity. Look at the balance compared to the credit line. Lenders like to see balances be about one-third of credit limits. An occasional late payment on a credit account is not that big of a deal but multiple “late pays” can be an issue, especially if they’re recent. Late payments on a credit report only show payments made more than 30, 60, 90 days and beyond past the due date.

Ask for verification of employment and pay. Get copies of recent pay check stubs that cover a one-month period. If someone is self-employed, look at personal and business tax returns. Mortgage companies like to see the total mortgage payment, which includes property taxes and insurance, be around 33-38 percent of gross monthly income. If credit and income are in line, then you might have a good candidate.

But you need to ask why the potential buyers are asking in the first place. Why are they asking for a higher priced mortgage in the first place? Many times it’s because someone is newly self-employed. Traditional mortgage guidelines ask there be at least two years of self-employment verified by filed federal income tax returns. For example, an individual has been working as a plumber for 10 years and decides to go out on his own but has only been self-employed for a few months. A bank might have a problem with that but if the guy has clients, bank statements show some cash flow from the business and everything else is in order, that might be a good candidate.

Remember, carrying back any mortgage, be it a first or second lien, is completely up to you. People find out they can carry a mortgage for their buyers and get better returns than they can get at their bank, plus the loan is secured by the asset.


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3 Reasons to Use a Real Estate Pro in a Complex Digital World

3 Reasons to Use a Real Estate Pro in a Complex Digital World

Presented as a public service by Joe Peters of Coldwell Banker

If you’re searching for a home online, you’re not alone; lots of people are doing it. The question is, are you using all of your available resources, and are you using them wisely? Here’s why the Internet is a great place to start the home-buying process, and the truth on why it should never be your only go-to resource when it comes to making such an important decision.

According to the National Association of Realtors (NAR), the three most popular information sources home buyers use in the home search are:

  • Online website (93%)
  • Real estate agent (86%)
  • Mobile/tablet website or app (73%)

Clearly, you’re not alone if you’re starting your search online; 93% of home buyers are right there with you. The even better news: 86% of buyers are also getting their information from a real estate agent at the same time.

Here are 3 top reasons why using a real estate professional in addition to a digital search is key:

1. There’s More to Real Estate Than Finding a Home Online. It’s a lonely and complicated trek around the web if you don’t have a real estate professional to also help you through the 230 possible steps you’ll face as you navigate through a real estate transaction. That’s a pretty staggering number! Determining your price, submitting an offer, and successful negotiation are just a few of these key steps in the sequence. You’ll definitely want someone who has been there before to help you through it.

2. You Need a Skilled Negotiator. In today’s market, hiring a talented negotiator could save you thousands, maybe even tens of thousands of dollars. From the original offer to the appraisal and the inspection, many of the intricate steps can get complicated and confusing. You need someone who can keep the deal together until it closes.

3. It Is Crucial to Make a Competitive and Compelling Offer. There is so much information out there in the news and on the Internet about home sales, prices, and mortgage rates. How do you know what’s specifically going on in your area? How do you know what to offer on your dream home without paying too much or offending the seller with a lowball offer?

Dave Ramsey, the financial guru, advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Hiring a real estate professional who has his or her finger on the pulse of the market will make your buying experience an informed and educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

Bottom Line

If you’re ready to start your search online, let’s get together. You’ll want someone who is educated and informed at your side who can answer your questions and guide you through a process that can be complex and confusing if you go at it with the Internet alone.


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Be on the Lookout for Gen Z: The Next Generation of Homebuyers

Be on the Lookout for Gen Z: The Next Generation of Homebuyers

Presented as a public service by Joe Peters of Coldwell Banker

You’ve likely heard a ton about Millennials, but what about Gen Z? In the next 5 years, this generation will be between the ages of 23 and 28, and they’re eager to become homeowners faster than you may think.

According to realtor.com,Nearly 80 percent of Generation Z members say they want to own a home before age 30,” and Concentrix Analytics said, “52% of prospective Gen Z buyers are already saving to buy a home.”

Wikipedia defines Generation Z (Gen Z) as “the demographic cohort after the Millennials. Demographers and researchers typically use the mid-1990s to mid-2000s as starting birth years.”

The report from Concentrix goes a little deeper on Gen Z, identifying the main reasons this cohort wants to own homes:

  • 55% want to own a home because they want to start a family
  • 47% want to build wealth over time
  • 33% want to make their family proud

Although they’re eager to buy, this generation also perceives a few challenges ahead:

  • 66% believe saving for a down payment and closing costs will be challenging
  • 58% feel covering the monthly costs of owning may be difficult
  • 52% perceive a lack of knowledge about where to start

It is also interesting to note that 21% of Gen Zers think their parents will provide financial help, 17% will use a down payment assistance program, and 15% believe other family members will help them. One of the highlights of the report mentioned,

“More than half of Gen Zers who think they’ll receive help also think they will need to pay their parents back, compared to 40 percent of millennials.”

Bottom Line

It is never too early to start saving for your own home, whether you are part of Gen Z or a different generation. If you would like to know where to start and how much you need to save to reach your goal of buying a home, let’s get together so you can better understand the process.


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Existing-Home Sales Report Indicates Now Is a Great Time to Sell

Existing-Home Sales Report Indicates Now Is a Great Time to Sell

Presented as a public service by Joe Peters of Coldwell Banker

The best time to sell anything is when demand for that item is high and the supply of that item is limited. The latest Existing-Home Sales Report released by the National Association of Realtors (NAR), reveals that demand for housing continues to be strong, but the supply is struggling to keep pace. With this trend likely continuing throughout 2020, now is a great time to sell your house.

THE EXISTING-HOME SALES REPORT

The most important data revealed in this report was not actually sales. In reality, it was the inventory of homes for sale (supply). The report explained:

  • Total housing inventory at the end of August decreased 2.6% to 1.86 million homes available for sale.
  • Unsold inventory is lower than the 4.3-month figure recorded in August 2018.
  • This represents a 1-month supply at the current sales pace.

According to Lawrence Yun, Chief Economist at NAR,

“Sales are up, but inventory numbers remain low and are thereby pushing up
home prices.”

In real estate, there is a simple guideline that often applies here. Essentially, when there is less than a 6-month supply of inventory available, we are in a seller’s market and we will see greater appreciation. Between a 6 to 7-month supply is a neutral market, where prices will increase at the rate of inflation. More than a 7-month supply means we are in a buyer’s market and can expect depreciation in home values (see below):Existing-Home Sales Report Indicates Now Is a Great Time to Sell | MyKCMAs we mentioned before, there is currently a 4.1-month supply of homes on the market, and houses are going under contract fast. The Existing Home Sales Report also shows that 49% of properties were on the market for less than a month when they were sold. In August, properties sold nationally were typically on the market for 31 days. As Yun notes, this should continue,

“As expected, buyers are finding it hard to resist the current rates…The desire to take advantage of these promising conditions is leading more buyers to the market.” 

Takeaway: Inventory of homes for sale is still well below the 6-month supply needed for a normal market, and supply will fail to catch up with demand if a sizable supply does not enter the market.

Bottom Line

If you are going to sell, now may be the time to take advantage of the ready, willing, and able buyers who are out there searching for your house to become their dream home.


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