Is everybody renting now? My partner Susan and I handle quite a few rental listings and right now they seem to be renting quite quickly and usually for full asking price, with first, last and security. For the first time in a couple years the rental market seems to be tightening. A couple years ago when there were a whole bunch of new construction town homes and homes on the market for rent and for sale, in foreclosure or up for short sales, there seemed to be so many properties to rent that you had to give them away. Now rental prices seem to be going up. I searched the area in east Lake Worth and town homes that were renting for $1,350-$1,400 per month are now $1,500-$1,600 per month. Not only that, but the landlords are holding out for the tenants that can pay three months rent up front (first, last and security), in addition to any pet fees and application fees.
Now that the rental market is heading in that direction the buying market should follow. If a tenant has $5,000-$6,000 to put down on a rental, then they have the down payment for FHA financing of a home.
A client of mine bought a $95,000 town home paying less than $7,000 down with the seller contributing almost $3,000 in closing cost assistance. The monthly mortgage payment is only $735.00!
There are town homes in Delray Beach and Lake Worth that are new construction, and are subsidized by the local municipality and the state (so income guidelines must be met), which offer incredible deals. How about a $240,000 town home with monthly payments starting at $730.00? Sound too good to be true, it’s not. It really exists!
The opportunity to own a home at a very good price and an affordable monthly rate is absolutely possible, and they are not hard to find. Happy hunting!
Friday, March 11, 2011
Thursday, February 3, 2011
Notes from my first auction.
Tuesday night I attended an auction here in West Palm Beach where about 80 residential properties were up for sale. The properties were located from Boca Raton north to Vero Beach and west to Clewiston and Okeechobee. They ranged from small one bedroom condos to large single family homes in golf course communities. This was my first auction of this type and it was an interesting several hours.
To preface the discussion, I reviewed the list of properties, printed out those that were in areas that I know and have an interest in. Then I went to preview them during the auction open house days. Some of the properties were not open during the open house days, but as a Realtor I was able to get lockbox codes from the listing agents and go preview them. Out of the 80 or so homes for sale I probably looked at a dozen or so.
The two key factors to consider prior to attending an auction are that any due diligence, including inspections, needs to be done prior to the auction itself and secondly that the properties seemed to sell for about what they were worth, so set your expectation level.
As I mentioned before a number of the properties were not available to preview but yet sold at the auction. Some how, some way you need to get into the property and bring an inspector to inspect the property, if you feel it’s necessary. An accurate assessment of the condition of the property and the work that needs to be done is critical and must be done prior to the auction. Take some time and go visit the local municipality to verify that there aren’t any assessments or fines associated with the property. It is also wise to consult an attorney to review the contract prior to the auction to make sure there aren’t any legal issues you need to be aware of. Be sure to conduct thorough due diligence.
By saying that the properties were selling for what they are worth I am not saying that they aren’t discounted somewhat. They are, but just not as much as people think when they think of auctions. Buyers and sellers alike always imagine properties going for pennies. There were a few condos and villas that sold in the $20-25,000 range. I was not sure of the condition of some of them, but even if someone needed to spend some money doing renovations, they probably pan out to be good rental income. Most of all, the people buying knew exactly which property they wanted and the maximum price they would pay. In the end if you pay 10% less than market value for a house that you want, then you got it for a discount.
One example is a town home in the Cloisters sold for $135,000 (plus a 5% buyers premium), or $67.50 per square foot. Over the past year town homes in Lake Worth have been selling for $68.00 per square foot. Comparing apples to apples though this unit sold for about $25,000 less than the last sale of the same model, although that sale was almost a year ago. Another example is a 2BR/2BA condo in the Moorings in Lantana sold for $50,000 (plus a 5% buyers premium). Sounds like a great deal, but there are listings in the same building below it and on the same floor starting at $64,800. The last sales in the building were as low as $70,000. So $50,000 is a good, solid discount. To reiterate, if that is the specific community that you want to own in, then you purchased the unit at about a 20% discount, which is certainly worth the extra effort.
Auctions are a viable way to buy and sell homes, but it is a different process than a traditional sale. Learn the process, follow the advice of the professionals you hire to help guide you and make sure you do your homework before you bid.
To preface the discussion, I reviewed the list of properties, printed out those that were in areas that I know and have an interest in. Then I went to preview them during the auction open house days. Some of the properties were not open during the open house days, but as a Realtor I was able to get lockbox codes from the listing agents and go preview them. Out of the 80 or so homes for sale I probably looked at a dozen or so.
The two key factors to consider prior to attending an auction are that any due diligence, including inspections, needs to be done prior to the auction itself and secondly that the properties seemed to sell for about what they were worth, so set your expectation level.
As I mentioned before a number of the properties were not available to preview but yet sold at the auction. Some how, some way you need to get into the property and bring an inspector to inspect the property, if you feel it’s necessary. An accurate assessment of the condition of the property and the work that needs to be done is critical and must be done prior to the auction. Take some time and go visit the local municipality to verify that there aren’t any assessments or fines associated with the property. It is also wise to consult an attorney to review the contract prior to the auction to make sure there aren’t any legal issues you need to be aware of. Be sure to conduct thorough due diligence.
By saying that the properties were selling for what they are worth I am not saying that they aren’t discounted somewhat. They are, but just not as much as people think when they think of auctions. Buyers and sellers alike always imagine properties going for pennies. There were a few condos and villas that sold in the $20-25,000 range. I was not sure of the condition of some of them, but even if someone needed to spend some money doing renovations, they probably pan out to be good rental income. Most of all, the people buying knew exactly which property they wanted and the maximum price they would pay. In the end if you pay 10% less than market value for a house that you want, then you got it for a discount.
One example is a town home in the Cloisters sold for $135,000 (plus a 5% buyers premium), or $67.50 per square foot. Over the past year town homes in Lake Worth have been selling for $68.00 per square foot. Comparing apples to apples though this unit sold for about $25,000 less than the last sale of the same model, although that sale was almost a year ago. Another example is a 2BR/2BA condo in the Moorings in Lantana sold for $50,000 (plus a 5% buyers premium). Sounds like a great deal, but there are listings in the same building below it and on the same floor starting at $64,800. The last sales in the building were as low as $70,000. So $50,000 is a good, solid discount. To reiterate, if that is the specific community that you want to own in, then you purchased the unit at about a 20% discount, which is certainly worth the extra effort.
Auctions are a viable way to buy and sell homes, but it is a different process than a traditional sale. Learn the process, follow the advice of the professionals you hire to help guide you and make sure you do your homework before you bid.
Monday, January 31, 2011
Should I do the work?
This weekend I spent all day Saturday showing houses to a client looking to buy a home and I hosted an open house on Sunday at one of our new listings. First of all, our listing is a great house that the seller spent time renovating. He redid the floors, the AC, updated the electrical and plumbing and replaced the windows. Overall he did a good job with the home and it is priced right and, therefore, should sell relatively quickly. I am pointing this out because when I was out showing houses on Saturday my buyers ended up liking the nicest, cleanest and most updated house that we saw. Even though their motivation is to buy something that is a “great deal” and don‘t mind work, they gravitate towards the home that is already finished. It’s kind of like when you go to buy a new car. You first look at the great deal in the newspaper and ask to see that car. Of course, it is stripped down and doesn’t have many of the luxury items that are offered in that model. Then you look at the one with the sunroof, navigation system, alloy rims, leather seats and that is the one that really gets your heart racing.
It is the same with real estate. If I am out showing houses, the one that is clean, staged, lighted well and nicely landscaped will always garner more attention. So many sellers want to cut corners when they are getting ready to sell the home because they say that it may not be exactly what the buyer wants. The best thing that a seller can do is look at their home objectively (which I admit is very hard) and try to focus on the things that may turn off a buyer. If the bathroom is dated, then it really doesn’t cost that much to replace a vanity & top, paint and accessorize. If the kitchen has wallpaper, then take it down and paint. Trimming trees and hedges, adding flowers and fixing pavers and irrigation systems are simple, low cost items to spruce up the house. Remember, buyers may say they don’t mind work, but if there is a house down the street or in the next neighborhood that doesn’t need any work and yours does, most buyers will choose that house over yours. That results in a lower price to get your home sold, not really the best option.
Take the time to consult a professional and find out the items that are most important for you to work on. Listen to them objectively and it will pay off.
It is the same with real estate. If I am out showing houses, the one that is clean, staged, lighted well and nicely landscaped will always garner more attention. So many sellers want to cut corners when they are getting ready to sell the home because they say that it may not be exactly what the buyer wants. The best thing that a seller can do is look at their home objectively (which I admit is very hard) and try to focus on the things that may turn off a buyer. If the bathroom is dated, then it really doesn’t cost that much to replace a vanity & top, paint and accessorize. If the kitchen has wallpaper, then take it down and paint. Trimming trees and hedges, adding flowers and fixing pavers and irrigation systems are simple, low cost items to spruce up the house. Remember, buyers may say they don’t mind work, but if there is a house down the street or in the next neighborhood that doesn’t need any work and yours does, most buyers will choose that house over yours. That results in a lower price to get your home sold, not really the best option.
Take the time to consult a professional and find out the items that are most important for you to work on. Listen to them objectively and it will pay off.
Monday, January 17, 2011
MLK Day and Fair Housing Laws
I was driving into the office this morning contemplating what it means to me that it’s Martin Luther King Jr. Day today. My thoughts swirled around and settled on how his vision affects my life as a Realtor, which lead me to think about the Fair Housing Laws.
When I am out showing property just about every buyer has the same question, “So, Matt, who lives in this neighborhood?” The question is often followed with a more specific question about the demographics. Some people want to live in an area where there are more people of their own race, religion or cultural heritage. Others have the opposite view and say that they do not want to live in an area which is comprised of a particular demographic.
The Fair Housing Laws prohibit us Realtors from answering either of the above questions. The Florida state statute Fla. Stat. §§ 760.20-760.60 - Act prohibits discrimination based on race, color, national origin, sex, handicap, familial status, or religion. In real estate school we learn that we sell real estate, not people. My response to any such question is, “I cannot talk about who lives here.”
How we answer buyers questions about who lives in a neighborhood is one of the ultimate tests of integrity for a real estate agent. Imagine this scenario: You are trying to sell your home and you live in a cul-de-sac. On your street there are ten homes owned by people who are as diverse as our nation. If your listing agent or any of the buyers agents were to answer the questions posed to them about who lives there, what is the probability that your home sells for its true value? Whether a buyer wants to be near a certain demographic or away from another demographic, neither of those scenarios exist on this street. Even at the risk of being redundant it is critical that we continue to answer any questions simply and succinctly, “I cannot talk about who lives here.”
To quote Dr. King, “I look to a day when people will not be judged by the color of their skin, but by the content of their character.” The Fair Housing Laws expanded upon his vision and we real estate agents need to make sure we follow them to the letter.
When I am out showing property just about every buyer has the same question, “So, Matt, who lives in this neighborhood?” The question is often followed with a more specific question about the demographics. Some people want to live in an area where there are more people of their own race, religion or cultural heritage. Others have the opposite view and say that they do not want to live in an area which is comprised of a particular demographic.
The Fair Housing Laws prohibit us Realtors from answering either of the above questions. The Florida state statute Fla. Stat. §§ 760.20-760.60 - Act prohibits discrimination based on race, color, national origin, sex, handicap, familial status, or religion. In real estate school we learn that we sell real estate, not people. My response to any such question is, “I cannot talk about who lives here.”
How we answer buyers questions about who lives in a neighborhood is one of the ultimate tests of integrity for a real estate agent. Imagine this scenario: You are trying to sell your home and you live in a cul-de-sac. On your street there are ten homes owned by people who are as diverse as our nation. If your listing agent or any of the buyers agents were to answer the questions posed to them about who lives there, what is the probability that your home sells for its true value? Whether a buyer wants to be near a certain demographic or away from another demographic, neither of those scenarios exist on this street. Even at the risk of being redundant it is critical that we continue to answer any questions simply and succinctly, “I cannot talk about who lives here.”
To quote Dr. King, “I look to a day when people will not be judged by the color of their skin, but by the content of their character.” The Fair Housing Laws expanded upon his vision and we real estate agents need to make sure we follow them to the letter.
Thursday, January 13, 2011
Patience anyone?
It seems that now everyone has heard a short sale nightmare story. A few of our clients have some. After submitting a legitimate offer they wait patiently. One month, two months, three months. It drags on and then finally the bank comes back with a demand that the sellers fork over big chunks of cash and the buyer needs to pay a price higher than the appraised price. While not the norm, it does happen.
Patience can be rewarded too. One example is that we had been showing a client a number of homes in their price range and in the area where they were looking to live. We found a few that were good but none that seemed to be “the one“. Then it arrived. We jumped all over it and got our offer in immediately, only to find out that there was another offer, which the sellers had miraculously accepted. It was a disappointment but we spoke with the buyer, the seller and the listing agent and we agreed that we would execute a backup contract. There are specific forms and language that determines what happens with a backup contract. In essence, if the contract in first position is cancelled then the backup contract moves up and becomes the primary contract.
We kept our eyes open for other opportunities for our buyer and even went to take a look at a few. After a few months we received a call from the listing agent that the first buyer was cancelling the contract. The terms and conditions changed slightly, so went back to the house, took a final look and moved forward with the contract.
Patience will be rewarded in achieving your goal of buying a home. Don’t rule out short sales and don’t rule out submitting backup contracts. Just remember that the most important factor in making either of these decisions is to ask all the right questions up front to understand your chance for success.
Patience can be rewarded too. One example is that we had been showing a client a number of homes in their price range and in the area where they were looking to live. We found a few that were good but none that seemed to be “the one“. Then it arrived. We jumped all over it and got our offer in immediately, only to find out that there was another offer, which the sellers had miraculously accepted. It was a disappointment but we spoke with the buyer, the seller and the listing agent and we agreed that we would execute a backup contract. There are specific forms and language that determines what happens with a backup contract. In essence, if the contract in first position is cancelled then the backup contract moves up and becomes the primary contract.
We kept our eyes open for other opportunities for our buyer and even went to take a look at a few. After a few months we received a call from the listing agent that the first buyer was cancelling the contract. The terms and conditions changed slightly, so went back to the house, took a final look and moved forward with the contract.
Patience will be rewarded in achieving your goal of buying a home. Don’t rule out short sales and don’t rule out submitting backup contracts. Just remember that the most important factor in making either of these decisions is to ask all the right questions up front to understand your chance for success.
Tuesday, January 11, 2011
Customer Service?
During a conversation here in the office a number of us picked up on a theme. I am sure it comes as no surprise but customer service seems to be sorely lacking, in our industry as well.
The conversation started innocently enough with one agent asking another about a restaurant. Other agents started to chime in about the place and what they liked and didn’t like about it. In the end, a number of people felt that the food was good but the service was lacking. Someone then likened it to real estate agents who don’t feel it necessary to keep their clients or other agents informed. Imagine buying the house of your dreams but once you are under contract and excited to move through the process you never get any calls about what to expect or which step to take next. I thought about it and remembered a client telling me the other day that their friend was going through a short sale at the same time that I was guiding them. My client said that her friends agent never called and she wanted me to know that she was appreciative of the constant calls.
As buyers or sellers you are entitled to consistent updates and to feeling like you are the most important client that your agent has. When I started in this business I remember my broker saying that each agent needs to speak to their sellers at least once a week. I also recall a real estate coach telling me that if my client called me asking for an update then I was late in calling them. I aspire to achieving both goals.
For the most part though a good agent will keep their clients in the loop throughout the buying or selling process. It is a stressful time and the constant communication is the one thing that can help alleviate some of that stress, especially when times are tough. With all the means of communication at our finger tips such as texting, email, chat, IM, twitter, or facebook, we have no excuse for not keeping our clients up to date. Better than all of those is a phone call or face to face meeting. Nothing can replace hearing the calmness in someone’s voice or seeing their expression to give you the confidence that you are being properly guided.
No matter what industry you are in, pick up the phone and call your clients. They deserve it.
The conversation started innocently enough with one agent asking another about a restaurant. Other agents started to chime in about the place and what they liked and didn’t like about it. In the end, a number of people felt that the food was good but the service was lacking. Someone then likened it to real estate agents who don’t feel it necessary to keep their clients or other agents informed. Imagine buying the house of your dreams but once you are under contract and excited to move through the process you never get any calls about what to expect or which step to take next. I thought about it and remembered a client telling me the other day that their friend was going through a short sale at the same time that I was guiding them. My client said that her friends agent never called and she wanted me to know that she was appreciative of the constant calls.
As buyers or sellers you are entitled to consistent updates and to feeling like you are the most important client that your agent has. When I started in this business I remember my broker saying that each agent needs to speak to their sellers at least once a week. I also recall a real estate coach telling me that if my client called me asking for an update then I was late in calling them. I aspire to achieving both goals.
For the most part though a good agent will keep their clients in the loop throughout the buying or selling process. It is a stressful time and the constant communication is the one thing that can help alleviate some of that stress, especially when times are tough. With all the means of communication at our finger tips such as texting, email, chat, IM, twitter, or facebook, we have no excuse for not keeping our clients up to date. Better than all of those is a phone call or face to face meeting. Nothing can replace hearing the calmness in someone’s voice or seeing their expression to give you the confidence that you are being properly guided.
No matter what industry you are in, pick up the phone and call your clients. They deserve it.
Monday, January 10, 2011
Elimination of Mortgage Interest Deduction
This is a very important issue that Congress is considering. Here is the reprint of an article that was posted on NAR's website, www.realtor.org that gives some financial analysis if the mortgage interest deduction were to be eliminated.
December 7, 2010
By Danielle Hale, Research Economist
In recent weeks, many proposals, suggesting a variety of changes to the tax system, have been discussed. The estimates below are for the complete elimination of these two tax benefits at current marginal tax rates, one of the most extreme possible changes.
Mortgage Interest Deduction Facts:
• 51 million—or 68 percent—of the approximately 75 million owner-occupied houses in the United States in 2009 had a mortgage.
• 38.5 million taxpayers claimed a deduction for mortgage interest, deducting a total of $470 billion, in 2008.
• The average taxpayer claiming the MID deducted $12,200 from taxable income in 2008.
• Therefore, the average taxpayer saved $3,050 in taxes by claiming the mortgage interest deduction1 .
• The total tax savings from the MID in the United States in 2008 was $117 billion.
Real Estate Tax Deductions Facts:
• 42 million taxpayers in the United States claimed a deduction for real estate taxes in 2008, deducting a total of $172 billion.
• The average taxpayer claiming the real estate tax deduction subtracted $4,090 from taxable income in 2008.
• Therefore the average taxpayer saved $1,020 in taxes as a result of the real estate tax deduction2 .
• The total savings from the real estate tax deduction in the United States in 2008 was $43 billion.
Eliminating Deductions: Losses for Home Owners and the Nation
If the mortgage interest and real estate tax deductions were eliminated, the loss would not be a one-year event; homeowners lose out on these potential savings each and every year. The present value3 of these lost savings could total $3.2 trillion. The value of all owner-occupied real estate in the United States in 2009 was $19.3 trillion4 . If the lost tax savings are fully capitalized into the price of houses, the average decline in value in the United States would be 17 percent. From the individual perspective, the median priced home in the United States in the third quarter 2010 was $177,800. A decline in value of 17 percent, as projected, would mean a loss in home value of $29,500 for the typical home owner.
These estimates, because they are based on a complete elimination of these deductions, can be viewed as a high-end estimate. Other changes will result in smaller losses to home owners. Additionally, national results are computed by looking at national averages. A very different picture can result when looking at the state level depending on the characteristics of the housing market, tax payers, and homeowners. For state information, contact data@realtors.org.
1Marginal rates range from 10 to 35 percent. A 25 percent rate was used to calculate the tax savings.
2Ibid.
3Present value calculation assumes 5 percent discount rate and 1000 year time horizon.
4As measured by the American Community Survey. The Federal Reserve Flow of Funds for 2009 estimated the market value of household real estate to be $17 trillion which would raise the estimate of the decline in value to 19 percent.
This is one in a series of commentaries by the Research staff of the National Association of REALTORS®.
December 7, 2010
By Danielle Hale, Research Economist
In recent weeks, many proposals, suggesting a variety of changes to the tax system, have been discussed. The estimates below are for the complete elimination of these two tax benefits at current marginal tax rates, one of the most extreme possible changes.
Mortgage Interest Deduction Facts:
• 51 million—or 68 percent—of the approximately 75 million owner-occupied houses in the United States in 2009 had a mortgage.
• 38.5 million taxpayers claimed a deduction for mortgage interest, deducting a total of $470 billion, in 2008.
• The average taxpayer claiming the MID deducted $12,200 from taxable income in 2008.
• Therefore, the average taxpayer saved $3,050 in taxes by claiming the mortgage interest deduction1 .
• The total tax savings from the MID in the United States in 2008 was $117 billion.
Real Estate Tax Deductions Facts:
• 42 million taxpayers in the United States claimed a deduction for real estate taxes in 2008, deducting a total of $172 billion.
• The average taxpayer claiming the real estate tax deduction subtracted $4,090 from taxable income in 2008.
• Therefore the average taxpayer saved $1,020 in taxes as a result of the real estate tax deduction2 .
• The total savings from the real estate tax deduction in the United States in 2008 was $43 billion.
Eliminating Deductions: Losses for Home Owners and the Nation
If the mortgage interest and real estate tax deductions were eliminated, the loss would not be a one-year event; homeowners lose out on these potential savings each and every year. The present value3 of these lost savings could total $3.2 trillion. The value of all owner-occupied real estate in the United States in 2009 was $19.3 trillion4 . If the lost tax savings are fully capitalized into the price of houses, the average decline in value in the United States would be 17 percent. From the individual perspective, the median priced home in the United States in the third quarter 2010 was $177,800. A decline in value of 17 percent, as projected, would mean a loss in home value of $29,500 for the typical home owner.
These estimates, because they are based on a complete elimination of these deductions, can be viewed as a high-end estimate. Other changes will result in smaller losses to home owners. Additionally, national results are computed by looking at national averages. A very different picture can result when looking at the state level depending on the characteristics of the housing market, tax payers, and homeowners. For state information, contact data@realtors.org.
1Marginal rates range from 10 to 35 percent. A 25 percent rate was used to calculate the tax savings.
2Ibid.
3Present value calculation assumes 5 percent discount rate and 1000 year time horizon.
4As measured by the American Community Survey. The Federal Reserve Flow of Funds for 2009 estimated the market value of household real estate to be $17 trillion which would raise the estimate of the decline in value to 19 percent.
This is one in a series of commentaries by the Research staff of the National Association of REALTORS®.
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