Blogging about Trends In Real Estate,….. Business….and Life.
Author Archives: Joe Luca, REALTOR
Joe is a Licensed REALTOR, providing Residential Real Estate Services in Massachusetts and Rhode Island and Income Property Advisory Services nationwide.
Joe is 2018 President of the Rhode Island Association of REALTORS. Member, Board of Directors, National Association of REALTORS®.
Joe has worked with many 501(c)3 corporations as a Broker and volunteering his time, skills, and services.
Homeownership has long been considered the American Dream, and it’s one every American should feel confident and powerful pursuing. But owning a home is also a deeply personal dream. Our home provides us with safety and security, and it’s a place where we can grow and flourish.
Today, we remember the legacy of Dr. Martin Luther King, Jr. Many of us will remember his passion and determination for the causes he championed, including his famous “I Have a Dream” speech in 1963. As we reflect on his message today, it may inspire your own dream of homeownership. And if so, know you’re not alone. With a trusted real estate advisor at your side, you can begin your journey toward homeownership by answering the questions below.
1. Where Do I Start?
The process of buying a home is not one to enter into lightly. You need to decide on key things like how long you plan on living in an area, how much space you need, what kind of commute works for you, and how much you can spend.
Then, when you decide you’re ready to buy, you’ll need to apply for a mortgage. Your lender will look at several factors to determine how much you’re able to borrow, including your credit history. Lenders want to understand how well you’ve managed paying your student loans, credit cards, car loans, and other past debts.
“To get a rough estimate of what you can afford, most lenders suggest that you should spend no more than 28% of your monthly gross (pre-tax) income on your mortgage payment, including principal, interest, taxes and insurance.”
2. How Do I Save Enough for a Down Payment?
Speaking of how much you can afford, you’ll want to know what to save for a down payment. While the idea of saving for a down payment can be daunting, there are many different options and resources that can help.
According to Business Insider, automatic savings can bring you one step closer to achieving your target down payment:
“If you receive your paycheck as a direct deposit, you may want to arrange for your company to send a percentage of each check directly into a savings account for the down payment. . . . The automatic-savings strategy makes it so you don’t have to constantly remember to save money.”
Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process. And the best part is, you may need to save less for your down payment than you think. Your agent and lender can help you understand your options.
3. How Can I Reach My Financial Goals?
Another way to increase your savings is by sticking to a planned budget. If you’ve never budgeted before, there are tools available. For example, MoneyFit.org provides a budgeting worksheet you can use to create your own plan and five rules to follow when you’re saving. They recommend you:
Compare and Calculate
Fix Weak Spots
If you’re already budgeting, consider finding ways to tighten your spending a bit more to accelerate your journey to homeownership. After all, putting even a little extra into your savings each month can truly add up over time.
As you set out to realize your dream of homeownership this year, know that it’s achievable with careful planning. Most importantly, let’s connect today so you don’t have to walk alone on this journey.
If your goal is to purchase a home this year, you might be looking for any advantage you can get in today’s sellers’ market. While competition is still fierce for homebuyers, there are ways you can win and secure the home of your dreams, even in a hot market.
Act Early and Save
The earlier you act this year, the more affordable your purchase will be. That’s because experts project mortgage rates will rise as we move deeper into 2022. According to Freddie Mac, the average 30-year fixed-rate mortgage is expected to be 3.5% by year’s end. Experts forecast home prices will rise as well.
That means the longer you wait, the more it will cost you to buy a home. Instead, act early and purchase your home before rates and prices rise further. Not to mention, the sooner you buy, the sooner you can experience the benefits of continued home price appreciation yourself. Once you have your home, you’ll be able to watch its value rise, giving you confidence that your investment is a sound one.
Buy Now, Move Later
Keep in mind, with high buyer demand like we’re seeing today, you’ll be competing against other potential homebuyers, which means you need to find a way to stand out. One way to accomplish this is to negotiate with sellers and present terms that meet their ideal needs. Danielle Hale, Chief Economist for realtor.com, explains one lever flexible buyers can pull to entice sellers:
“For buyers with more flexible timelines – such as those making a move from a big city – offering a couple extra months on the closing date could sweeten the deal for sellers who also need to buy their next home.”
In other words, if you’re eager to purchase a home now before it becomes more costly and you don’t have to move right away, you could extend the date of your closing and provide the seller with the time they need to find their next home. That’s a deal that could benefit both parties and help you stand out from the crowd.
Of course, it’s important to work with a real estate professional for expert advice on how to make your best offer. Your trusted advisor knows what’s working in your market and what may appeal to sellers.
Experts project home prices and rates will increase in 2022. That means buyers who are ready should act soon and find ways to strengthen their offer to meet sellers’ needs. Let’s connect today to learn how you can win in today’s market.
It’s economy 101 – when supply is low and demand is high, prices naturally rise. That’s what’s happening in today’s housing market. Home prices are appreciating at near-historic rates, and that’s creating some challenges when it comes to home appraisals.
In recent months, it’s become increasingly common for an appraisal to come in below the contract price on the house. Shawn Telford, Chief Appraiser for CoreLogic, explains it like this:
“Recently, we observed buyers paying prices above listing price and higher than the market data available to appraisers can support. This difference is known as ‘the appraisal gap . . . .’”
Why does an appraisal gap happen?
Basically, with the heightened buyer demand, purchasers are often willing to pay over asking to secure the home of their dreams. If you’ve ever toured a house you’ve fallen in love with, you understand. Once you start to picture yourself and your furniture in the rooms, you want to do everything you can to land the property, including putting in a high offer to try to beat out other would-be buyers.
When the appraiser comes in, they look at things a bit more objectively. Their job is to assess the inherent value of the home, so they’re going to study the facts. Dustin Harris, Appraiser Coach, drives this point home:
“It’s important for everyone to understand that the appraiser’s job in the end is to remain that unbiased third party, to truly tell the client what that home is worth in the current market, regardless of what decisions have been made on the price side of things.”
In simple terms, while homebuyers may be willing to pay more, appraisers are there to assess the market value of the home. Their goal is to make sure the lender isn’t loaning more money than the home is worth. It’s objective, rather than emotional.
In a highly competitive market like today’s, having a discrepancy between the two numbers isn’t unusual. Here’s a look at the increasing rate of appraisal gaps, according to data from CoreLogic (see graph below):
What does this mean for you?
Ultimately, knowledge is power. The best thing you can do is understand appraisal gaps may impact your transaction if you’re buying or selling. If you do encounter an appraisal below your contract price, know that in today’s sellers’ market, the most common approach is for the seller to ask the buyer to make up the difference in price. Buyers, be prepared to bring extra money to the table if you really want the home.
Above all else, lean on your real estate agent. Whether you’re a buyer or seller, your trusted advisor is your ally if you come up against an appraisal gap. We’ll help you understand your options and handle any additional negotiations that need to happen.
In today’s real estate market, it’s important to stay informed on the latest trends. Let’s connect so you have an ally to help you navigate an appraisal gap to get the best possible outcome.
In the maze of forms, financing, inspections, marketing, pricing, and negotiating, it makes sense to work with professionals who know the community and much more. It is always best to use an Experienced local REALTOR® who serves your area. The REALTOR® is the “Hub” of the transaction and will refer clients to the best lenders, home inspectors, closing/escrow companies, and moving companies. A good REALTOR® will know who is experienced, professional, licensed (when necessary), insured and provides great service to his/her clients.
2. Get a Mortgage Pre-Approval
Most first-time buyers need to finance their home purchase, and a consultation with a preferred mortgage lender is a crucial step in the process. Find out how much you can afford before you begin your home search. You will need a mortgage pre-approval before you can submit an Offer; we will show you homes as soon as you receive a pre-approval. **In Fact, due to COVID many Sellers instruct listing agents to only show their home to individuals that are pre-approved for a mortgage.
Get the Right Mortgage for Your Situation
There are many different types of mortgage programs out there, but as a first-time home buyer, you should be aware of the three basics: adjustable rate, fixed rate and interest-only.
Adjustable rate mortgages (ARMs) are short-term mortgages that offer an interest rate that is fixed for a short period, usually between one to seven years. After that, the interest rate can adjust every year up or down, depending on the market. These are good for people who don’t plan on living in their home very long and/or are looking for a lower interest rate and payment. I would STRONGLY advise against an adjustable mortgage now.
Fixed-rate mortgages are more traditional and offer a fixed interest rate (and thus a fixed monthly payment) for a longer period, usually 15 or 30 years, though they’re available in 20 or 25 year terms. These are good for people who like a predictable payment and plan on living in their home for a long time.
Both fixed and adjustable rate mortgages can have an interest-only payment. What this means is that for a certain amount of time during the loan term, you’re allowed to pay only enough to cover the interest portion of your payment. You can still pay principal when you wish, but don’t have to if your budget is tight. There is a myth that with interest-only mortgages, you don’t build equity. This is not necessarily true, since you can build equity through home appreciation. The benefit to interest-only mortgages is that you increase your cash flow by not paying principal.
3. Look at Homes
A quick search on our site https://www.homes4saleinri.com/ will bring up thousands of homes for sale. Educating yourself on your local market and working with an experienced REALTOR®, can help you narrow your priorities and make an informed decision about which home to choose. Good REALTORS® will ask you questions about what you want and need in a home and compare that with what you can afford. When you receive listings to consider, before scheduling an appointment drive by them to see if you like the neighborhood. The housing inventory is tight in southern New England, so don’t get frustrated if other buyers get an offer in before you, or they offer more money. That happens A LOT in this market.
4. Choose a Home
While no one can know for sure what will happen to housing values, if you choose to buy a home that meets your needs and priorities, you’ll be happy living in it for years to come. Once you and the seller have reached agreement on a price, the house will go into escrow, which is the time-period it takes to complete all of the remaining steps in the home buying process.
Don’t forget people make money in real estate when they buy it, NOT when they sell it. A good, experienced REALTOR® will help you determine the best “Value” for your situation.
5. Home Inspection
Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent usually will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage.
Remember, a Home Inspection is a “snapshot” of the condition of home on a specific day at aa specific time. Home inspectors typically don’t have access to 2/3’s of the home so they cannot be expected to inspect/observe conditions for areas they cannot see. They cannot see behind paneling, inside walls, or around boxes stacked up in a basement or garage.
You will receive a report on the home inspector’s findings. You can then decide if you want to ask the seller to fix anything on the property before closing the sale. Before the sale closes, you will have a walk-through of the house, which gives you the chance to confirm that any agreed-upon repairs have been made.
The cost of financing your home purchase is usually greater than the price of the home itself (after interest, closing costs, and taxes are added). Get as much information as possible regarding your mortgage options and other costs. Your Lender will take care of all of the financing details, paperwork, arrange the appraisal and keep you informed.
7. Make an Offer
While much attention is paid to the asking price of a home, a proposal to buy includes both the price and terms. In some cases, terms can represent thousands of dollars in additional value—or additional costs—for buyers.
8. Find Insurance
No homeowner should be without insurance. Real estate insurance protects owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime. Joe can recommend a good insurance agent who is experienced in working with home buyers – especially first time home buyers.
It is highly recommended that you use the services of a licensed, insured, experienced mover. Whether moving across town or across the country, utilize the services of a professional mover. The potential cost of moving yourself or with “amateur” movers can be significant. Damage to furniture, floors, walls, the cost of renting a truck, quilts, dollies, straps, etc, quickly add up. Then there is always the possibility of bodily injury; hurting your back or someone sustaining serious injury that could involve lawsuits.
The fees charged by a professional mover usually are less than the above potentialities.
10. The Closing
Before the Closing, the Buyer’s REALTOR® should arrange for a Final Walk-Through, of the house to confirm that all of the Seller’s belongings that should have been removed, and those that should remain are still in the house, and that no damage transpired overnight.
The closing process, also known as “settlement” or “escrow,” is increasingly computerized and does vary in different areas. In practice, closings bring together a variety of parties (Buyer and Seller, Closing/Escrow Representative, and sometimes a Seller’s Closing Attorney) who are part of the real estate transaction.
10. Post Closing
Don’t forget to have the utilities, internet access, landline telephone service etc switched into your name. It is much easier to switch service while it is still “on” compared to after it has been terminated.
In 1963, Martin Luther King, Jr. inspired a powerful movement with his famous “I Have a Dream” speech. Through his passion and determination, he sparked interest, ambition, and courage in his audience. Today, reflecting on his message encourages many of us to think about our own dreams, goals, beliefs, and aspirations. For many Americans, one of those common goals is owning a home: a piece of land, a roof over our heads, and a place where we can grow and flourish.
If you’re dreaming of buying a home this year, start by connecting with a local real estate professional to understand what goes into the process. With a trusted advisor at your side, you can then begin to answer the questions below to set yourself up for homebuying success.
1. How Can I Better Understand the Process, and How Much Can I Afford?
The process of buying a home is not one to enter into lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.
Keep in mind, before you start the process to purchase a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time. If your financial situation has changed recently, be sure to discuss that with your lender as well. Most agents have loan officers they trust and will provide referrals for you.
“Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget.”
2. How Much Do I Need for a Down Payment?
In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources in the market to potentially reduce the amount you may think you need to put down.
If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.orgsays:
“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”
Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process.
3. Saving Takes Time: Practice Living on a Budget
As tempting as it is to pass the extra time you may be spending at home these days with a little retail therapy, putting that extra money toward your down payment will help accelerate your path to homeownership. It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score.
A survey of millennial spending shows, “68% reported that shelter in place orders helped them save for their down payment.” Danielle Hale, Chief Economist at realtor.com, also notes:
“If there is any silver lining to the current economic landscape, it’s that mortgage rates are hanging around record lows…Additionally, shelter-in-place orders helped many who were fortunate enough to keep their jobs save for a down payment — one of the largest hurdles of buying a home. The combination of low rates and the opportunity to save is enabling many millennials to move up their home buying timeline.”
While you don’t need to cut all of the extras out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.
If homeownership is on your dream list this year, take a good look at what you can prioritize to help you get there. To determine the steps you should take to start the process, let’s connect today.
The housing market recovery coming into the new year has been nothing short of remarkable. Many experts agree the turnaround from the nation’s economic pause is playing out extremely well for real estate, and the current market conditions are truly making this winter an ideal time to make a move. Here’s a dive into some of the biggest wins for homebuyers this season.
1. Mortgage Rates Are Historically Low
In 2020, mortgage rates hit all-time lows 16 times. Continued low rates have set buyers up for significant long-term gains. In fact, realtor.com notes:
“Given this means homes could cost potentially tens of thousands less over the lifetime of the loan.”
Essentially, it’s less expensive to borrow money for a home loan today than it has been in years past. Although mortgage rates are expected to remain relatively low in 2021, even the slightest increase can make a big difference in your payments over the lifetime of a home loan. So, this is a huge opportunity to capitalize on right now before mortgage rates start to rise.
2. Equity Is Growing
According to John Burns Consulting, 58.7% of homes in the U.S. have at least 60% equity, and 42.1% of all homes in this country are mortgage-free, meaning they’re owned free and clear.
In addition, CoreLogic notes the average equity homeowners gained since last year is $17,000. That’s a tremendous amount of forced savings for homeowners, and an opportunity to use this increasing equity to make a move into a home that fits your changing needs this season.
3. Home Prices Are Appreciating
According to leading experts, home prices are forecasted to continue appreciating. Today, many experts are projecting more moderate home price growth than last year, but still moving in an upward direction through 2021.
Knowing home values are increasing while mortgage rates are so low should help you feel confident that buying a home before prices rise even higher is a strong long-term investment.
4. There Are Not Enough Homes for Sale
With today’s low inventory of homes on the market, which is contributing to this home price appreciation, sellers are in the driver’s seat. The competition is high among buyers, so homes are selling quickly.
Making a move while so many buyers are looking for homes to purchase may mean your house rises to the top of the buyer pool. Selling your house before more listings come to the market in the traditionally busy spring market might be your best chance to shine.
If you’re considering making a move, this may be your moment, especially with today’s low mortgage rates and limited inventory. Let’s connect to get you set up for homebuying success in the new year.
A REALTOR’s® Relationships with Colleagues, Partners and Vendors Can Save a Transaction.
A REALTOR’s® job (in a nutshell) is to procure the sale of real estate between a willing buyer and seller.
We have all been part of, or witnessed, a transaction that does not go well. Whether it is buying/leasing a car, or retaining the services of a contractor, unless the parties are successful in communicating extremely clearly, there is always a possibility for a “miscommunication”. This can lead to wounded egos, unhappy parties, or an issue to be resolved by litigation. Can a Relationship save a transaction?
My relationship with my network is essential to client-satisfaction. Whether referring a client to another REALTOR® a thousand miles away, or a local lender, I have extreme confidence in my referral partners. When you are looking for a REALTOR® to partner with, it is essential that he/she have strong relationships with their referral network.
As a Full-Time REALTOR® for over a decade, I am fortunate that I have not had anything worse than the “wounded ego” (mine) experience in my business. Live-and- Learn. One of the ways I have virtually eliminated the chance of these types of “miscommunications” is by putting all important communications in writing. Additionally, I am very selective when choosing business partners and vendors to whom I refer business. My partners and vendors are full-time (so they aren’t distracted by another job,) professional (they conduct themselves and behave appropriately,) ethical (they don’t put anything in front of the client’s best interests,) and licensed, and insured. Having established relationships with people of this caliber, reduces the chance a client will be unhappy with me, because of an experience they had with a referral partner.
My colleagues who are also at the top of their game usually have strong networks of referral partners that they rely on for their clients’ needs.
There are lots of good REALTORS®, but what sets some apart is the strength of the relationships they have with their referral network. There have been times when I have to request that a partner, or vendor, to go the “extra (ethical) mile” to help bring a transaction to the Closing Table. Maybe it is as simple as asking my preferred moving company to squeeze in an extra moving job for a client who scheduled a move with another mover whose truck broke down, or calling North Smithfield Tree Service to remove tree limbs that the Seller couldn’t get removed and it’s the day before Closing.
The difference between success and failure maybe the extra effort exerted as a result of a relationship between the REALTOR® and a someone in their network.
That is why Relationships are essential in the business of Real Estate. YES, a relationship CAN save a transaction.
Joe Luca is a full-time REALTOR® who helps buyers and sellers achieve their real estate goals.
If you want to become a Landlord, The Following May Be Of Interest.
FACTOID #1: A full 90% of new multifamily construction today is rentals according to one study.
For the last several years, demand in multifamily has outpaced new construction, causing some places to see huge spikes in rent prices. Still demand has not slowed.
FACTOID #2: Multi-Family prices have been growing by up to 8% year-over-year.
Listed below are some of the most important things that today’s tenants are looking for in a rental.
As with any other type of business, the location of your building can, and likely will, have a large impact on the revenue you bring in. Tenants often look for a property that is close to their place of employment, and that offers easy access to grocery stores, restaurants, parks, and more. Tenants are often willing to pay more, or even overlook less than desirable aspects of the unit, in exchange for the quality of lifestyle offered from being in a great neighborhood. Millennials are attracted to the convenience of advanced technology. They expect that same kind of convenience in their living environments (grocery store within walking distance, public transportation just a few blocks from the apartment, office or workspace accessible by light rail or bus). The more walkable the location, the more attractive it is to young renters.
With more and more consumers choosing to rent, it stands to reason that more families are choosing to rent rather than own. Along with location, tenants are likely looking at the area’s school district, as well. After all, every parent wants the very best for their child — and a safe, quality education is at the top of many parents’ lists.
Think about it — no one enjoys driving around for an hour looking for a parking spot that’s close to home. While there may be ample parking spaces for your suburban property, parking can be a bit of a challenge in urban areas. If you can’t offer easy off-street parking for your tenants, consider directing your tenants to a parking garage that’s located nearby.
…but not all tenants have cars.
Multi-Modal Transportation Options for Residents
Parking lots are disappearing to make room for more pedestrian friendly options. Most millennials in urban areas do not own cars. They bike, walk, or ride to work. Some high-end multifamily developers are including bike repair and storage “shops” in their buildings or providing ridesharing pickup and drop-off locations on-site.
Convenient On-Site Package Delivery Systems
More than a quarter of the workforce today does not work from an office. Mailing letters or shipping packages usually requires a trip to a FedEx or post office. One amenity attracting young professionals are on-site package delivery systems where packages are received and signed for in real-time through an alert sent to a tenant’s smartphone. Packages can also be sent out from the apartment with pickups scheduled from the apartment’s online platform.
Activities Space and Luxurious Common Areas
Gyms are not the only community spaces tenants want. New developers will need to think about adding an on-site café, workspaces, and lounge areas. Some unique ideas include community gardens and wine tasting rooms, community theaters or apartment pubs or pool halls.
Renovations and Upgrades
Sometimes, the smallest details are the ones that really make a house feel like a home — and that can secure a lease on your space. Upgrades that are smart and strategic, such as hardwood floors or stainless-steel appliances, can help attract higher quality tenants. Other renovations that rank highly among tenants include renovations in the kitchen and bathrooms, updated cabinet hardware, central air conditioning, and a new kitchen backsplash.
Think of these features you offer your tenants as a way of demonstrating to them how you expect to be treated in return — and the care you expect to be given to your building. Even small steps can indicate to your tenants that you really care about the property and that you will be responsive to any necessary property maintenance — always a big concern for renters. By offering these features that tenants are looking for, you are differentiating your property from the competition — allowing you to attract and retain better tenants and enjoy a better return on your investment.
If you have any questions about any of the above information call or text Joe Luca, REALTOR® at 401-580-9797.
The above information was obtained from various web articles published by NAR, CBRE, and NAI Global.
Time When you decide to FSBO be prepared to sacrifice a lot of time. From staging the property and taking perfect pictures to getting the description and marketing right. You’ll also spend time showing the property, entertaining lookie-loo’s and door-kickers, and talking with agents who won’t take you seriously.
Costs When you sell by owner you may think you’re saving money but in reality you’re often spending a lot of money up front with no guarantee of any return. Listing agents spend a calculated amount of money up front to make sure a listing sells and ultimately pays both you and them both fairly.
Saving On Commission Choosing to FSBO doesn’t really save you money. On average, homes sold by agents get $230k compared to $180k for FSBO. When you find the right agent they will price your property to get the most money in the shortest time, a combination that can mean 10-30% more net profit. When you are considering saving 1.5-3% on a listing commission you should take that into consideration.
No Money Up Front Listing agents do not charge anything upfront to sell your home. If they spend thousands and can’t sell it for the price you want, they are out those thousands, not you! This is perhaps one of the greatest things about using an agent. There is an extremely low risk and cost to doing so!
Perception The perception of FSBO sellers is that they are not serious about selling their properties and are often just testing the market or seeing if they can get some far fetched price or perfect buyer that isn’t realistic. They are often not taken seriously in the real estate community because they don’t see the value in representation by an agent or broker.
Marketing You might be ready to post your home on Facebook and Craigslist a few times, but you don’t have the ultimate home selling tool – the MLS. The multiple listing service can be accessed by licensed real estate agents, and is the way to get your home listed on sites like Realtor.com, Zillow, and Trulia. A large majority of home buyers begin their search on sites like these, and you want your home to be seen by as many buyers as possible to get the best price. It’s no surprise that homes sold via FSBO have seen a steady decline as online real estate has become the norm.
Liability When you sell your home without an agent, any mistakes you make can cost you greatly. Agents have something called E&O (Errors & Omissions) Insurance. This protects them when mistakes are made in contracts. When you sell on your own, others can make sure to exploit every little mistake you make.
Agent Boycott/Sabotage When you decide to sell your home yourself you are telling other agents that you don’t understand their value in a multi-billion dollar industry. Agents often see FSBO sellers as easy marks to negotiate against because they have the upper hand. They control the buyer/offer and can negotiate their own commission. They can also pick your property and price apart because they have the expertise to do so. They don’t need to worry about treating you unfairly because the chance of them dealing with you again is slim to none. More often than not they will simply ignore your listing altogether to avoid the hassle.
Pricing Incorrectly Pricing your home incorrectly when you list it can be the worst mistake, and can greatly affect days on market and final sales price. Pricing too high will mean fewer people see it, resulting in fewer offers. Price it too low and you’re conveying that something is wrong with the property or that you are desperate to sell. More days on market will also signal to buyers that something is wrong and can ultimately mean less money upon final sale. Learn more about setting the price right here.
Low Ballers When you FSBO you attract investors and low-ballers who see your inexperience and ignorance as a prime opportunity. What may seem like a lot to you may be a steal to them. An experienced agent will understand this and negotiate the most money possible for you.
Timing the market isn’t usually a fruitful endeavor…it’s certainly not rewarding. The decision to invest in rental property should be driven by objective data, not “timing”.
Some things you may want to consider:
Are you personally prepared to be a landlord? “Landlording” isn’t always easy, and it isn’t usually fun. Unlike owning mutual funds, stocks and bonds, it is an active investment. You need to be engaged and committed to being a good Landlord. Unlike the aforementioned, you CAN buy an investment worth five times the amount of money you are committing to the investment by leveraging your investment with a mortgage.
How much money do you have to invest? You need to have enough for a down payment and some reserves for repairs, maintenance, and vacancies.
Will you live in the investment property? This can be a great way to get started if you buy a multi-family.
Will you qualify for a mortgage? Mortgage products for investment properties have different guidelines than mortgages for single family properties.
What are the rental rates in the neighborhoods where you would be looking to invest? Rental rates have been increasing much faster than the cost of ownership nationwide. For example: three rental units generating $3,600/month can support a lot of debt-service, taxes, insurance, and vacancy ratio of 5%. (A $375,000 mortgage with 20% down would have a PITI payment of under $3,000/month at 6.5%.)
While I can’t predict when the next “Crash” is going to occur, it doesn’t appear to be on the horizon based on the empirical data. If it is, and you buy a good property in a good neighborhood, in a desirable town, you will be shielded from the downturn much better than if you bought a property in a not-so-good neighborhood. You will be shielded even more if you are uber-selective with your tenants. Good tenants are almost worth their weight in gold if you compare them to the cost of bad tenants.
Knowledge is power so your best first step may be to have a conversation with an experienced, full-time REALTOR® to assess if investing in real estate is the right “move” for you.