The real estate market is not a realm for the faint of heart. If you’re a neophyte in home buying or selling process, you might be expecting that your real estate agent would be your ultimate confidant and partner in guiding you through one of the major financial choices of your life. While this is the ideal setup, some experienced home buyers or sellers would attest that this is not the case in the real world. Matter of fact is that real estate agents and brokers are simply not as loose-lipped as they appear to be.
In a recent interview by the New York Times with Ryan Serhant who is a top New York City real estate agent and a star of the Bravo reality show “Million Dollar Listing New York,” he said this;
Real Estate Is a Darwinian Struggle for Survival
“Sometimes real estate can get dirty,” Serhant told ABC News’ Deborah Roberts. “This is a bare-knuckle business, and there are no refs on the sidelines.”
“In New York City alone, there are 27,000 real estate agents,” he continued. “Last year there were 12,598 contracts, right? That means a lot of real estate agents did not do deals.”
Was he a shark?
“You have to be,” Serhant said.
There you have it straight from the shark’s own mouth and now you know when buying or selling real estate that you are more than likely dealing with true life human sharks in suits. Some homebuyers and sellers new to the scene may be traumatized when they find out that not all professionals, act professionally truthful. It wouldn’t hurt, therefore, to go the extra mile of protecting yourself from the information that your real estate agent won’t tell you. Whether you are dealing with a real estate agent, or a real estate broker, there are some simple secrets that everyone should know before going into real estate.
Here are the top ten secrets of the trade that your broker may be keeping from you:
1. “My commission is negotiable.”
Real estate agents will never tell you that their commission isn’t set in stone. Some real estate professionals of course will probably keep this secret in the dark to try to keep their fees as high as possible.
Many agencies charge sellers a 6% commission to list their homes which is then split into half between the buyer’s and the seller’s agent. The reality is there is not a set fee to sell a home ,and the 6% is just the industry standard. Therefor, if you want lower fees, you can search for a company who will do it at a lower rate or you can simply negotiate lower fees with the listing broker.
Note that commission rates can vary depending on the area or type of sale the agent is performing. For example, a short sale is typically much harder to complete than a home that has no mortgage issues. Commercial property and land may have a higher commission rate due to the complexities involved in marketing and selling these types of properties. Also, the higher the value of the property, the more bargaining power you may have to negotiate lower fees, but it never hurts to ask even on lower or mid-priced properties.
Please keep in mind that sometimes paying a lower fee may not be in your best interest. Hence, sometimes quality representation is better than saving a large quantity of money for terrible service.
2. “Other provisions in the contract are also negotiable.”
Be aware that there are other parts of your contract with an agent that are negotiable. The following are the things that you could take up for a discussion with your agent:
First, look at the length of the listing agreement and negotiate to set it to 90 days. This way, you can get out of the agreement sooner if your agent turns out to be ineffective in selling your property. Second, look at the other “transaction” or “administrative” fees in the contract. These are additional fees on top of the standard commission that could ne negotiated. You can never be sure if your agent is telling you all the fees upfront so it is better to start the discussion on other hidden charges.
3. “I tell my friends about your property before I post it in the listing service.”
To be able to get a favorable commission split, real estate agents prefer to work with agents from their own firm. This is why your real estate agent will most likely tip-off other brokers at his firm about your property before posting it to the Multiple Listing Service (MLS) database.
This practice is not necessarily detrimental to you as long as your broke ensures that your property is exposed to a wide audience of potential homebuyers. Do not easily jump into offers that come right away from your broker’s colleague. Insist on waiting for more offers to guarantee that you are getting the best price for your property.
4. “The open house is more beneficial to me”
While your agent encourages you to hold an open house to recruit serious buyers, this kind of strategy often generates home buyer business for your realtor. According to a study made by the National Association of Realtors, only 11% of properties are actually sold through open house receptions. This is because most people who attend open houses are either tourists neighbors or people who want some free food. 89% of them are simply not serious buyers because they are can’t or are not ready to buy a home. These “some-day buyers” most likely serve your agent’s future transactions.
5. “I know nothing about the neighborhood.”
No one person can know everything about every city or neighborhood. Some real estate agents will sell your home or help you buy a home anywhere, but many of them have very little or no knowledge of the area. This lack of knowledge may hurt you if you are a buyer or seller. But there are many agents who have spent years representing buyers and seller in particular cities and or neighborhoods. These are the agents you should have represent you.
It is important for you to be aware of key issues in the new neighborhood so it would be wise for you to ask your agent to set up tours around the neighborhood multiple times – one on weekdays and one on weekends. Be sure to conduct inspections during the morning, afternoon, and evening.
6. “You might face some zoning pains.”
Loose lips sink ships and in real estate, loose lips kill deals which can then affect a Realtor’s commissions. Trust your salesperson, but always verify the facts to make sure they are not misleading you in any way so they can make their commission. Especially be more diligent and don’t believe your agent when he says that you can basically do anything with the place.
Study the Transfer Disclosure Agreement before you make an offer. Get the information you need for possible zoning problems from homeowners associations and the city planning department. Check out if the property is covered by right-of-way conditions, conservation easements, and other regulations. It is better to know these things at an early stage.
7. “The home inspector I recommended also works for me.”
The reality is that a home inspection can often make or break a sale. Hence, the home inspection is a very important part of every real estate transaction. However, please be aware that the home inspector that your real estate agent recommended could rubberstamp the inspection in exchange for a repeat business with the broker. Sometimes, brokers could also endorse inspectors who only identify small problems and ignore big ones.
Of course, not every agent does this and there are plenty of great agents who deal with only ethical home inspectors, but how are you to know this is the case? To be able to avoid this from happening, you could also search for a licensed inspector yourself.
8. “”The warranty clause in your contract is pointless.”
Do not find comfort in the warranties included in the contract of the newly constructed property you just bought. While developers and the brokers sell this guarantee upon negotiations, the description of the covered defects is so carefully worded that most of your eventual claims would end up invalid.
Beware of the waiver of your right to sue in your contract. If possible, get your own lawyer to negotiate your listing contract.
9. “Your home isn’t worth as much.”
While some agents could tell you upfront about the real market price of your property, there are those who encourage bizarre expectations just to immediately get you to sign for his or her services. Later on, the agent will tell you to cut your price to a more realistic level.
You would want to opt for a broker who would manage your expectations well from the start by telling you the truth rather than disappointing you later.
10. “You actually don’t need to me sell this house.”
You will never hear your agent tell you that you could actually sell your property by yourself. It is actually possible for you to sell your home and save the commission intended for the broker for yourself. Sometimes this is easier said then done. However, with a lot of effort, education and time you could handle the sale yourself. You could develop a marketing plan to list your property online, and to arrange showing with potential buyers.
More and more cash strapped seniors are looking for reasonable mortgage solutions to their money problems. The most popular loan today for senior citizens is the Federal Housing Administration (FHA) insured Home Equity Conversion Mortgage (HECM) or what is more commonly known as a reverse mortgage. These loans allow seniors who own a single family home or a 2-4 unit home with one unit occupied by the borrower and are over the age of 62 years or older to borrow money against the equity in their property. The special feature that helps these older borrowers is the fact that they can get a loan without the hassle of making a monthly mortgage payment.
These type of loans grew significantly from fiscal year 2012 to 2013. With income becoming smaller and home equity growing larger for many seniors, reverse mortgages are expected to grow at an average rate of 16% over the next several years. It is important to look at the reasons why these mortgages may continue to rise in 2014.
First off, there is an increased elderly population. This population is thought to grow another 10% by 2014 and to be 19% of the U.S. population by 2030. Because of this, these individuals will continue to contribute to the reverse mortgage market in large numbers. Another reason for this reverse mortgage wave is the fact that it is a great way to decrease debt for cash strapped seniors. When the person pays their monthly mortgage payment equity will grow in the home. It goes without saying that the debt they own on their mortgage is going to decrease.
This month was the lowest level of foreclosures since 2005, while home equity exceeded $10 trillion for the first time since 2007. This is massive increase in home equity is one of the reasons why reverse mortgages have become popular in recent years because many senior citizens are using the funds as a way to supplement their income. The Federal Reserve recently reported that new equity in the U.S. housing market rose by $2.2 trillion from the 3rd quarter of 2012 up through the 3rd quarter of 2013, and 2014 should see similar growth patterms. According to a study conducted last year by Integrated Financial Engineering, the HECM Fund’s economic value is projected to grow to $15.38 billion, with insurance-in-force of nearly $161.5 billion by the end of fiscal year 2014. That’s a lot of loans being insured.
Today, the seniors that own homes are going to have a lot more equity in their homes compared to other seniors in the past. The amount of equity in homes has grown more than $117 billion in the last few years. As the real estate market has somewhat stabilized over the years, home values across the nation will continue to go up and it is only natural that the number of home reverse home loans will also continue to increase. These factors combined with a massive increase of seniors who need cash and very low debt will make the number of reverse mortgage rise in the coming years ahead.
For More Information on Reverse Mortgages:
– Find housing counselors at the U.S. Department of Housing and Urban Development Web site @ www.hud.gov/offices/hsg/sfh/hecm/hecmlist.cfm. Or call 1-800-569-4287 or 1-877-483-1515.
– Visit NeighborWorks America‘s Web site @ www.nw.org/network/home.asp.
– AARP Foundation, Reverse Mortgage Education Project @ www.aarp.org/revmo 1-800-209-8085
– U.S. Department of Housing and Urban Development @ www.hud.gov/offices/hsg/sfh/hecm/hecmhome.cfm or 1-800-CALL-FHA (1-800-225-5342)
National Association of Reverse Mortgage Lenders www.reversemortgage.org/Home/tabid/63/Default.aspx
This article is about for profit school scams, slimy loans and students committing loan fraud by using mom’s identity to pay for multiple cosmetic surgeries. I know, it totally sounds like a bad script for an American trashy cable TV show. But this is a true story based on facts, rather than the imagination of a Hollywood script writer.
First we had the mortgage and real estate crisis of 2007. A crisis partly fueled by deceptive mortgage lending, greedy borrowers and massive fraud from Wall Street to Main Street. Fast forward to today, now we are in a full scale student loan crisis that is just beginning to rear its ugly head with the highest default rates in nearly two decades.
There are many reasons why this happening. For example, recent college graduates are having a tough time finding a job time in this rough economy. Simply put, a college degree is by no means a one way ticket to easy job street. With no job prospects for many grads, they have no way to pay back these loans. It is estimated the average amount of a defaulted loan is approximately $14,000. But the facts are many of these loans are in the tens of thousands of dollars, and strapped for cash students have been defaulting big time on their loans.
Now we also have to consider that many young student were duped, defrauded and just taken advantage of by unscrupulous for profit schools, and loan advisors. Schools that misled students with promises of rewarding careers, and then leaving them with very little real life job training and thousands of dollars in student debt.
An example of this student con job can be found in a lawsuit filed this past week by Massachusetts Attorney General Martha Coakley. The Massachusetts AG had said in a press release on April, 3rd:
The complaint , filed today in Suffolk Superior Court, alleges that since 2009, Corinthian Colleges, Inc. and Corinthian Schools, Inc., which operate Everest Institute, have misled Massachusetts students in order to increase profits for shareholders at the expense of students and taxpayers.
“We allege that this for-profit school aggressively recruited and misled students by falsely promising high quality, successful training programs, and instead left them with exorbitant student loan debt and without proper training or a well-paying career,” AG Coakley said. “Our office will continue to investigate the for-profit school industry as we continue to see students and taxpayers suffer the consequences of high default rates, inadequate training, and mounting debt.”
There have also recently been a large amount of arrests and prison sentences handed out for student loan fraud. In February, “Two Northern California residents have been sentenced to federal prison in separate student loan fraud cases,” the Associated Press reported and in November of 2013, “A Pennsylvania woman was sent to the slammer for 15 months after she fraudulently obtained $600000 in student loans to pay for cosmetic surgeries. prosecutors had said Meredith Shuster, 36, of Cranberry, Pa., a suburb north of Pittsburgh, used her parents’ identities to solicit the loans. She then used about half the money on a series of cosmetic surgeries to alter her appearance.”
The current real estate market is what I would call a bit crazy or even whack. This property lunacy has went on for about 7 years now, and there appears to be no end in sight.
There is no rhyme or reason to what home values and sales are doing across the country. The only thing that makes sense to me is that it is being consciously manipulated by both banks with their shadow inventory, and real estate investment firms lurking in the shadows paying ungodly sums for homes in cold hard cash.
All the while, home buyers, real estate agents and loan officers fight over the lack of inventory and home buying scraps. Many times these battles are hard on all parties involved because more often than not, you will have to put many offers on properties before you are able to officially go into escrow and close the deal. This is much easier said than done.
These bidding wars appear to be happening on just about every decent valued home that comes on to the MLS in many of the major hot metro areas all across the country. As they say, real estate is all about location, location! But does location, location equate to good values and smart home buying sense, or house hunting lunacy? I think it may be a little dash of everything because the American Dream of homeownership can be a reality that makes sense for some home buyers. But sometimes it may not always be the smart choice for your future living reality.
Maybe it is just the large metro areas of the country where people want to buy a home that are the problem? Meaning, that in these locations there are just too many people, too few homes, and too much competition to find a good value you can truly afford.
For example, Zillow had just come out with an article, “More than Half of For-Sale Homes in Seven Major Markets are Currently Unaffordable for Typical Buyers.” In the article it discusses how home buyers are having extreme trouble finding a house in Southern California, the Bay Area, Denver, Colorado, Portland, Oregon & Miami, Florida and that in the near future, many more communities will become unaffordable as mortgage rates rise.
Here are some pertinent quotes for you home buyers out there from Zillow:
Among the 35 largest metros nationwide, more than half of homes currently listed for sale[ii] in Miami (62.4 percent), Los Angeles (57.2 percent), San Diego (55.3 percent), San Francisco (55.2 percent), Denver (52.8 percent), San Jose (50.9 percent) and Portland, Ore. (50.3 percent) are unaffordable by historical standards.
Nationwide, just one-third of homes (33.6 percent) are currently unaffordable, and in many metro areas, the majority of homes remain more affordable now than they have been historically for buyers making the area’s median income. But as mortgage interest rates rise along with home values, affordability will worsen, and buyers will need to spend ever-larger shares of their incomes to buy increasingly expensive homes.
Home buyers making the median income in Los Angeles, San Francisco and San Jose should already expect to pay a larger share of their income today toward a mortgage than during the pre-bubble years. Zillow expects mortgage rates on a 30-year, fixed-rate mortgage to reach or exceed 5 percent by the first quarter of 2015. Assuming rates at that level and another year of forecasted home value growth, home buyers in San Diego; Riverside, Calif.; Portland, Ore.; Sacramento; and Miami will also soon be paying a larger share of their incomes to their mortgage than they were during the pre-bubble years.
Welcome to the market of home buying in 2014. The odds and inventory are simply stacked against you, but that doesn’t mean it is a futile endeavor. The key factors in making a good decision are based on being educated, prepared and having the right professionals working for you.
This is why having the best real estate agent and mortgage loan officer representing you the most important things you can do. To be competitive, you need competent professionals on your team who know exactly what they are doing so your chances of finding, and actually buying a home will go up dramatically.
The first step in the home buying process is having a good loan officer on your team who can get you prequalified for a good mortgage. That way when you do make an offer, it is a solid one that the seller and their agent will know you have the ability to get a loan in a timely manner. This is very important to in staying on top of the home search game. If you need a great mortgage rate and awesome loan officer to help you or to get prequalified to buy a home, then please call LoanSafe today at 800-779-4547 .