by The KCM Crew on July 22, 2014 in Foreclosures
According to the latest CoreLogic National Foreclosure Report, “approximately 660,000 homes in the US were in some state of foreclosure as of May 2014”. This figure is down 37% from the 1 million homes in May of 2013. May marked the 31st consecutive month in which there were year-over-year declines.
Mark Fleming chief economist for CoreLogic revealed:
“Significant gains have been made in the last year to reduce the foreclosure stock. Yet, these improvements are occurring disproportionately in non-judicial states. The foreclosure inventory in judicial states is averaging 2.1% which is more than twice the 0.9% average that is occurring in non-judicial states.”
The foreclosure process in the twenty-two judicial states can take, on average, anywhere from 180-400 days according to the Mortgage Bankers Association. The lack of initial court intervention in non-judicial states, often means that the process of foreclosure takes significantly less time.
Therefore, judicial states as a whole, have taken longer to catch up to the rest of the country in liquidating foreclosure inventory.
All five states with the highest foreclosure inventory as a percentage of mortgaged homes are judicial states.
On the list of the five lowest inventory states, only North Dakota uses a judicial process.
Even though some states have not recovered completely from the foreclosure crisis, the nation as a whole is on the right track as inventory decreases.
by The KCM Crew on June 17, 2014 in For Buyers
Lenders are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form. Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.
There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.
However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably below 5%.
The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of <5%, they would probably bend over backwards to make the process much easier.
Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.
by The KCM Crew on July 1, 2014 in For Buyers
Whether you are a first time buyer or a move-up buyer, you should look at the projections housing experts are making in two major areas: home prices and mortgage rates.
Over 100 economists, real estate experts and investment & market strategists were recently surveyed. They were asked to project where home prices were headed. The average value appreciation projected over the next twelve month period was approximately 4%.
In their last Economic & Housing Market Outlook, Freddie Mac predicted that 30 year fixed mortgage rates would be 4.8% by this time next year. As of last week, the Freddie Mac rate was 4.14%.
If you are a first time buyer currently looking at a home priced at $250,000, this is what it could cost you on a monthly basis if you wait to buy next year:
If you are a move-up buyer currently looking at a home priced at $500,000, this is what it could cost you on a monthly basis if you wait to buy next year:
With both home prices and interest rates projected to increase, buying now instead of later might make sense.
Call me if you think you might be ready to buy.......
Whether you are buying or selling a home, you need an experienced Real Estate Professional to lead you toward your ultimate goal. In this world of instant gratification and Internet searches, many sellers think that they can For Sale by Owner or FSBO.
The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but rather have been strengthened in recent months due to rising interest rates & home prices as the market recovers.
Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.
According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream?
So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process.
Not only is it important for your home to be priced correctly from the start, to attract the right buyers and shorten the time that it’s on the market, but you also need someone who is not emotionally connected to your home, to give you the truth as to your home’s value.
According to the National Association of REALTORS, “the typical FSBO home sold for $184,000 compared to $230,000 among agent-assisted home sales.”
Get the most out of your transaction by hiring a professional.
There is so much information out there on the news and the Internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to, to tell you how to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer?
“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.” – Dave Ramsey
Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.
You wouldn’t hike up Mt. Everest without a Sherpa, or replace the engine in your car without a trusted mechanic, why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?
Let me know if there's anything I can do for you!!! I'm always glad to be of service!!!!
by The KCM Crew on May 28, 2014 in For Buyers
Many experts are currently discussing a variety of topics such as real estate as an investment, the movement on mortgage interest rates and reasons to buy now instead of waiting. It is important that we realize that this does not apply solely to the first time home buyer.
The opportunity that exists in real estate today is there for everyone.
However, the family that already owns a home might be thinking that, if they wait, their home could be worth more next year than it is now. And that may cause them to delay moving up to the home of their dreams thinking it makes good financial sense. Actually, the opposite is true. This is the best chance a family has to buy up into the home that makes sense for their family right now.
We must realize that whatever percentage of value we gain on our house will also be gained on our dream home.
Let’s assume your current home is worth $500,000. Your house will be worth $520,000 next year if prices rise by 4% over that time (a number projected by the Home Price Expectation Survey).
However, the $750,000 home you are hoping to move into will also appreciate by about that same 4%. That means next year it will be valued at $780,000. You wouldn’t make $20,000 by waiting. You would actually be losing $10,000 ($30,000 - $20,000).
And, you will pay a lower interest rate on the mortgage than you probably will next year.
Plug in the numbers that apply to your house and the home you are longing to buy and see what the bottom line turns out to be for you.
That is how wealth is built in this country - by purchasing real estate at the right time, at the right price and at the right terms.
Go out and find your family's dream house and buy it! Ten years from now, you will be glad you did!
We at KCM pride ourselves on the quality of real estate information we deliver each and every day. We try to gather empirical evidence to validate the positions we take. We do not use just an anecdotal story to make a point. We also do not get caught up in the sensationalism of the moment. However, today will be different.
This adage could be no truer today after it has been reported, in a recent Herald Tribune article, that when it came to selling his Florida mansion, Al Bennati, the longtime chief executive of BuyOwner.com, has chosen to list his home with a local real estate agent.
BuyOwner.com is one of many websites out there now that encourage home owners that they do not need to enlist the help of a professional agent to be able to sell their home. They go as far as to tell homeowners:
"BuyOwner.com allows you to reach the most potential buyers in the shortest amount of time, in the most effective (the Internet) and most cost effective manner (no commission!) possible."
Let’s break down that statement:
Many have said that, with the introduction of home search on the internet, hiring an agent is no longer a necessity. When the time came to list his own home, Bennati went against his own advice saying:
"To sell a home of this magnitude, it needs to be done by a person and a company that reaches buyers of this caliber."
Without proper exposure to the “right kind of buyers” your home will not sell. Many real estate professionals have elaborate strategies to get your listing in front of exactly who needs to see it.
The most recent Home Sellers’ and Buyers’ Profile Report from the National Association of Realtors revealed that, though 92% of buyers search for a home on the internet, 90% still use a real estate professional.
This isn’t the first time that a CEO of a major FSBO website has enlisted the help of an agent when the time came to sell their own home. In August of 2011 we reported on Colby Sambrotto of forsalebyowner.com who, after failing to sell his home using FSBO websites, needed an agent to sell his NYC apartment.
And, he got more money!!!!
Two separate people made fortunes convincing others to sell their home through their FSBO sites. Yet, when it came to selling their own home, they recognized the value of using a real estate professional.
There is a reason the real estate industry has been around for centuries: it performs a valuable service.
by Steve Harney on May 6, 2014 in For Buyers
Our founder, Steve Harney, occasionally asks to do a personal post on what he sees as important to our industry. Today is one of those days. Enjoy! – The KCM Crew
I have been a subscriber to the Wall Street Journal (WSJ) for as long as I can remember. In my opinion, it is the single greatest source of financial information and insights available. I don’t always agree with their analysis but I always respect their position.
However, in an article this past weekend, The New Math of Renting vs. Buying, they flat out got it wrong. Below are a few excerpts from the article and the reason why I believe the analysis to be incorrect.
In the article, they discuss that homeownership is more expensive than renting in many large metropolitan areas.
"The monthly cost of renting was lower than buying in 20 large metropolitan areas at the end of last year, the most recent period for which data are available, according to figures provided exclusively to The Wall Street Journal by Deutsche Bank. That is up from 15 large metropolitan areas a year earlier.”
The challenge is that more recent data from two very reliable sources has shown that not to be the case. Among the 35 largest metro areas analyzed by Zillow in the first quarter, every metro showed it would be cheaper to buy than rent if you plan to live in the home for at least 4.2 years.
According to a study by Trulia:
“Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas. Rising mortgage rates and home prices have narrowed the gap over the past year, though rates have recently dropped and price gains are slowing. Now, at a 30-year fixed rate of 4.5%, buying is 38% cheaper than renting nationally.” (emphasis added)
The article goes on to explain that as a renter you have many less expenses than you would have as a homeowner:
"Renters, for example, don't pay property taxes, homeowner's insurance and, in most cases, maintenance costs. These expenses can cost homeowners about 3% of the price of their home annually, experts say.
While those costs can be folded into monthly rent, apartment renters often pay a smaller share as landlords spread the costs among many tenants, says Stijn Van Nieuwerburgh, director of the Center for Real Estate Finance Research at New York University. If a window breaks or the toilet plugs up, your landlord—not you—pays for the repairs."
Don’t kid yourself – the landlord does not pay the taxes nor pay for repairs. The tenant does. It is incorporated in the rent. It is true, if it is an apartment building, that the property taxes are shared by all tenants. However, realize that the amount of property taxes for an apartment building with “many tenants” will be far greater than a single family residence.
We think this situation is best explained by Eric Belsky, Managing Director of the Joint Center of Housing Studies at Harvard University, in his paper on homeownership - The Dream Lives On: the Future of Homeownership in America:
“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.” (emphasis is mine)
The WSJ article claims that, if a renter invests the difference between their rent payment and a potential mortgage payment had they purchased, they would be better off financially in the long run.
"Renters don't end up with a valuable asset, as buyers do when they pay off a mortgage. But renters might be able to make more money by investing the monthly savings, as well as the cash they would otherwise use for a down payment, he says."
They go on to explain their reasoning as follows:
"The value of the average single-family home increased by 3.6% a year in the three decades through 2013, compounded annually, according to mortgage giant Freddie Mac. By contrast, the compound annual return on the S&P 500 over that period was 11.1%, according to Chicago-based investment-research firm Morningstar."
As to the idea that the return on investment would be greater by investing in the stock market rather than purchase a home, I think the article in the WSJ forgot that housing is a leveraged investment. Belsky, in his paper, explains:
“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”
That 3.6% average annual appreciation is really an 18% return on cash to a home buyer putting down 20%.
They also assume the renter will save any difference in housing expense. However, that does not happen in reality. In their ongoing research for their paper, Beer and Cookies Impact on Homeowners’ Wealth Accumulation, Eli Beracha and Ken H. Johnson reveal that homeownership creates a ‘forced savings’ plan:
“It appears that homeownership creates extra wealth mainly through its ability to force owners to save rather than through property appreciation. Thus, homeownership appears to be a self-imposed savings plan, which through time leads to greater wealth accumulation as compared to comparable renters. In short, buying a home makes Americans save.”
And Belsky from Harvard agrees:
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”
To further make this point, we can look at a study by the Federal Reserve which showed that the net worth of a homeowner ($174,500) is 30 times greater than that of renter ($5,100).
Looking at financial advantages of homeownership from every angle still reveals that it is a much better investment than renting.
by The KCM Crew on April 29, 2014 in For Buyers, For Sellers
In a recent blog post, FreddieMac explained that “housing is stronger today than at any point since the Great Recession began and hit bottom in 2009”. They then gave three reasons which support their position:
FreddieMac also believes that the market will continue to improve through 2014. They projected:
Frank Nothaft, Freddie Mac vice president and chief economist, further explained what the housing market may look like in the agency’s April 2014 U.S. Economic and Housing Market Outlook:
"Tight inventory may pose a significant challenge for home buyers in many markets across the country, which may result in higher home prices and sales being lower than expected. This is good news for those markets that have room to run on the house price appreciation front, but it's also going to increase the affordability pinch in many markets, especially along the country's east and west coasts. Two indicators that are supporting local housing activity are rising consumer confidence and declining unemployment rates."
The real estate market is improving every day. The biggest challenge is a lack of inventory in many markets. If you are thinking about selling, now may be the time to make the move.
by The KCM Crew on April 22, 2014 in For Buyers, Millennials
We, at KCM, have often broken down the opportunity that exists now for Millennials who are willing and able to purchase a home NOW... Here are a couple other ways to look at the cost of waiting.
Let’s say you're 30 and your dream house costs $250,000 today, at 4.41% your monthly Mortgage Payment with Interest would be $1,253.38.
But you’re busy, you like your apartment, moving is such a hassle...You decide to wait till the end of next year to buy and all of a sudden, you’re 31, that same house is $270,000, at 5.7%. Your new payment per month is $1,567.08.
That’s like taking a $10 bill and tossing it out the window EVERY DAY!
Or you could look at it this way:
Let’s look at that number annually! Over the course of your new mortgage at 5.7%, your annual additional cost would be $3,764.40!
Had your eye on a vacation in the Caribbean? How about a 2-week trip through Europe? Or maybe your new house could really use a deck for entertaining. We could come up with 100’s of ways to spend $3,764, and we’re sure you could too!
Over the course of your 30 year loan, now at age 61, hopefully you are ready to retire soon, you would have spent an additional $112,932, all because when you were 30 you thought moving in 2014 was such a hassle or loved your apartment too much to leave yet.
Or maybe there wasn’t an agent out there who educated you on the true cost of waiting a year. Maybe they thought you wouldn’t be ready, but if they showed you that you could save $112,932, you’d at least listen to what they had to say.
They say hindsight is 20/20, we’d like to think that 30 years from now when you are 60, looking back, you would say to buy now…
5 Things Buyers Need to Hear Now for a Successful Buying Season
For real estate agents, May through August signals prime time to put your head down, pound the pavement and get deals done. You—and your clients—need to be ready to capitalize on the hot selling season, when 60% of all homes are bought and sold! And while you’ve been mentally preparing for the upcoming frenzy—your buyers may not have been.
Sure—buyers know that in order to prep for buying a home, they need to get things in order—from their must-have list to their financial paperwork. But as the real estate market continues to heat up into the busiest season of the year, there’s one major piece of the puzzle that many a homebuyer neglects to manage at all: their mindset.
Don’t let the failure to manage their own mindset be your client’s downfall (or a loss of your own time and effort!). Here are 5 spring things agents should remind their buyers now, especially in areas where multiple offers and over-asking sales prices are the norm:
In fitness, there is plenty of research that suggest that most people limit how hard they can push themselves because they mentally shutdown way before their body physically shuts down. Train for a marathon and the sage advice you’ll receive is that it’s all a mental game—get past that and the run becomes much easier. A mental shut down keeps us from making the progress we could otherwise make.
And the same goes for house hunting in a hot market. For many buyers, it takes losing a home—or a few homes!—before they realize that making below-market or timid offers doesn’t result in a great deal if it can’t grab the attention of a seller. Buyers should heed the advice of San Francisco buyers, who have been dealing with bizarrely strong seller’s market dynamics for longer than those in other areas of the country: Buyers who mess around making weak offers for too much time, can end up priced out of the market or the type of home they were hoping for, entirely.
Of course, being aggressive in an offer doesn’t mean blindly throwing money at homes. But agents should smartly educate their clients and share insights on things like:
Encourage your buyers to use that data to drive their decision-making about how much to offer. Buyers need to be reminded not to let delusions of getting a champagne home on a beer budget get the best of them.
For many buyers, the post-contract period can feel anticlimactic, after the frenzy of the house hunt and the drama of negotiations. But if buyers who want to get to a successful close and be happy with their home over the long term, need to stay just as engaged during escrow as they were during the house hunt. Agents need to stress the importance of all of the post-contract tasks—and set up reminders to ensure they get done. After all the time and effort the buyers and agent put in to finding the dream home and getting an offer accepted, the last thing you’d want to happen is for things to fall through the cracks. Many buyers don’t realize that things like showing up in person for an inspection or delivering paperwork to lenders promptly can make a big difference in how smoothly a transaction goes.
Conventional wisdom advises buyers not to get emotional about a property. But let’s be real—it’s easy to fall in love with a home and, frankly, buyers should have some level of excitement about a place that likely represents the biggest financial investment they’ll make.
So, to make an offer at all, buyers should be somewhat emotional about a place. But here’s the Catch-22. In many local markets, a wise buyer should also be prepared to lose at least a few properties before they are successful in scoring the one.
So how do you, their agent, help them do that? Detachment. Let them be excited, but also keep you buyers rooted in reality. This is a house, yes, but there are others out there. Tell them simply, “You do your best, pushing yourself to make the best, cleanest offer you can within the realm of what you can afford and what the comps support, and then you let go of the outcome. When the home you’re making an offer on is meant to be yours and you take this approach, things will fall into place.”
As in life, buyers should see every house hunting “failure” as an opportunity to course-correct their strategy. Every offer a buyer makes an offer on, but doesn’t get, can give them clues about the things they can do differently the next time to get them closer to their dream home. If a buyer is getting overbid, it’s the agents job to do a little bit of a budget reality check. If the buyer’s dream homes go pending before they get to see them, it’s the agents job to send them a reminder about putting this process as a top priority and making the effort to see homes as soon as you let them know about them. Buyers need to work with their agents to understand not working after a couple of unsuccessful attempts to buy a home and, more importantly, put a plan of action in place for course-correcting the way to house hunting success.
In the hot spring/summer market, hesitation kills deals. When co-buyers are not on the same page about what’s important, the time between seeing a home, deciding to make an offer and deciding how much to offer can be much longer than it should be. The delay can be devastating— many a dream home has been sold to the highest bidder while a couple argues over whether it’s the one.
It can be a tough conversation for agents to have—who wants to get in the middle of it?—but it’s important to mediate these situations without stepping over boundaries. Often it can be helpful to help buyers understand how they are communicating with each other—the job of a good real estate agent is to be an expert in communication dynamics as much as any other part of the process.