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Yet Even MORE B.S. Facts About Real Estate that Just Won’t Die!

Yet Even MORE B.S. Facts About Real Estate that Just Won’t Die!

🤥B.S. Facts About Real Estate That AREN’T TRUE!

So here’s how something can be a “fact”, but it’s not true:  In the age of internet “wisdom”, if something gets enough play on the internet, it grows legs. It sometimes grows arms and a head too. It ends up being true in many people’s minds. But the problem is…too often, it’s all B.S. Yep. I said it. BS Facts abound on the world-wide-web. Here are the first myths I came up with a little while ago: 15 B.S. Facts about Homebuying that People think are True. Let’s debunk some more myths about real estate.

There are three big reasons why real estate myths seem to never die:

A. Old news lasts a long time on the internet. The problem is that any local real estate market can change on a dime. The truth is, real estate market trends are always in transition, no matter where they are.

B. As well as market changes, its also true that markets are very local. All Real Estate is Local. What is fact in one market may not be in another.

C. Probably the biggest lie on the internet, about any news or any industry for that matter, is the myth about social proof. “If enough people are saying it, it must be true!” 🙄 In the days of clickbait and shock talk, we should all be naturally suspicious of the popularity of any statement.

💩Let’s dig in to a Dozen more B.S. Facts…

and debunk them with a little help from my friends: 

🤔BS Fact #1:  “Home values are on the rise, it’s the perfect time for us to push the market and price our home higher.”

In many markets around the country the inventory is low, but the demand is still strong. The age-old law of supply and demand comes into play in these markets…home values are on the rise. We typically refer to this as a “seller’s market”.

Some home sellers interpret a seller’s market to mean that they can ask whatever they think their home is worth, pushing their price higher to meet what they hope will be a future value. The problem is, this tactic rarely works. It usually backfires.

Most home buyers today are working with a buyer’s agent. A buyer’s agent has a fiduciary responsibility with their buyer-client, and is looking out for their best interest. One of the things that they will certainly do is ensure that their client NOT overpay for a home. They will be researching the current market value of any home their buyer is interested in making an offer on.

  • 💡As Eileen Anderson, Realtor® and blogger in Simsbury Connecticut points out, “Even if buyers insist on moving forward with the purchase, unless they are a cash buyer, you run the risk of the home not appraising and the buyer not being able to obtain a mortgage.” Be sure to read her article “Top 7 Myths about Home Pricing” for more tips.

🤪BS Fact #2:  “It’s a seller’s market, I don’t need to do any prep on my home.”

A seller’s market can be punctuated by a low inventory of homes. Some seller’s might interpret that to mean buyers will have fewer choices so they will “have to take what’s available”. So why bother preparing their home for the market. Like overpricing, this logic usually backfires too!

Today’s home buyers are savvy! As much as 95 percent of home buyers are looking on the internet for their next home. They are looking at home values, watching home videos, taking 3-D tours of listings…they have more tools at their fingertips than ever to make wise decisions regarding their home purchase.

The truth is, most buyers today want move-in ready value if they are going to pay top dollar. It doesn’t matter if it’s a tight inventory, when a home needs repairs or updates, the price reductions start ticking off in the minds of today’s buyers.

  • 💡In his own myth-busting article for home sellers, Xavier DeBuck, Johannesburg real estate agent, points out that by getting a home move-in ready before marketing it, the seller wins by increasing the pool of interested buyers. Not only that, you strengthen your negotiating position. Read the rest of his helpful seller tips: 15 Home Selling Myths You Need to Stop Believing.

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😕BS Fact #3:  “My home is worth more than the comparable homes because of all the renovations I did.”

While it is true that the best way to get top dollar is to keep your home maintained and up-to-date throughout the time you own it, it isn’t true that everything you do will bring a good return on investment. Some upgrades and renovations bring a good ROI, others don’t. There are two mistakes that you can make: under-improving and over-improving. But of the two, you cannot recover from over-improving…you just have to take your lumps!

All houses are different and all neighborhoods have different standards. Local market trends can change over the years. Like most things in real estate, there’s no rule about home improvements…except the rule that says, “it depends”.

BS Facts about real estateBefore we even talk about which improvements add value and which don’t, there is an important overall consideration: Who is your most likely buyer? If your home is in an active adult community, buyer expectations are a lot different than they would be if your home was in a neighborhood with starter homes, or a townhouse or condo development.

To make sure you are doing the best updates and renovations possible, it’s not only important to know the expectations of your ideal buyer, it is crucial to research comparative. If the standard in your comparative market is granite counters and stainless-steel appliances, then your home will pale in comparison if you’re still living with laminate and mismatched bottom-of-the line appliances. The opposite can also be true, if the standard is laminate, then spending top dollar in the kitchen would be a waste of money.

The best resource is a local experienced Realtor®. Trust me, we love it when we get a call from a homeowner asking us for advice on what to update and what not to worry about. Even if they aren’t planning to sell in the near future, that’s ok. We know that making the smart improvements will make it easier to sell for the best price in the shortest amount of time. We’re happy to help.

  • 💡Xavier De Buck, Johannesburg Luxury real estate agent, has 15 myths sellers should believe. Among his many good tips for home sellers, he points out that according to Remodeling Magazine’s Remodeling Cost vs. Value Report, the average improvement only recoups of 64% of the cost of the renovations! So be careful about those big sweeping ideas that you get after watching one of those HGTV shows!

 

😩BS Fact #4:  “My house isn’t selling because my Realtor® hasn’t done enough open houses!”

I know that Just about every HGTV show ends with a grand open house, where all the magic happens. But, that is T.V. Real life is different. Open houses don’t usually sell homes. Statistics don’t lie. Historically, the number of homes that sold because of the open house is less than 4%.

The vast majority of homes are sold because of a cooperating agent seeing the home on the local MLS, or Multiple List Service. The next largest number is from buyers who saw the home on the internet (on any one of dozens of real estate websites) and told their buyer’s agent about it. Open can be a good opportunity to get feedback, both from buyers and from other real estate agents, but they generally don’t sell a home.

They do, however, serve another purpose. Watch my friend Kristina Smallhorn, from Ascension Parrish LA, reveal the secret!

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😡BS Fact #5:  “That’s not what Zillow said my house is worth!”

Online Valuations are everywhere, including Zillow, Trulia, Realtor.com and most brokerage websites. They are increasingly used to get home owners to frequent a website. We even have one on our website, so that sellers can have a ballpark number:

 

But, there are limitations with ballpark numbers. I mean, a single hit that gets you to first base is in the ballpark, just like a deep left field hit that gets you a triple. But there’s a big difference between the two hits, especially if the bases are loaded!

The Trouble with Zestimates and Other Online Valuations

Firstly, these are numbers generated by an algorithm. Algorithms take in comparative data and can do a pretty good general job of finding similar values. The problem comes when there are nuances that an algorithm can’t decipher. The algorithm can’t

  • look inside the house and see any updates. It also can’t
  • know that the differences in the neighborhood two streets away are enough to take 10% off the value of the an otherwise similar home.
  • An algorithm can’t know that this house backs to the freeway, while that similar house backs to a nature preserve.
  • The algorithm can’t know that there is huge demand for this house and not that similar one, just because it’s in a different school district.

There are so many reasons why you need a Realtor® to do a Comparative Market Analysis (CMA) to help you narrow down the correct price for your home, in your neighborhood, in your present market conditions. If your house is truly unique, then your Realtor® will recommend an appraisal for the most accurate pricing.

Here’s the Truth: Zillow, Trulia and Realtor.com are marketing websites, not owned or operated by any real estate company. They do an amazing job at marketing! However, they are not bound by the National Association of Realtors® Code of Ethics, which requires that we be truthful and accurate in all our marketing.

The other Truth: Neither Zillow, Trulia or Realtor.com determine the market price of a home.

  • 💡Lynn Pineda, fellow eXp Realty agent in Coral Springs Florida, points out several false notions about real estate in Top 4 Fake Real Estate Revelations. She separates fact from fiction, especially when it comes to assessing the correct value of a home. The seller doesn’t determine the price, even though he or she intimately knows the home from top to bottom. And no, the Realtor® doesn’t determine the value of a home. The local market does.

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👛BS Fact #6:  “A Financial Guru told my to put 20% down on a home. I don’t have that kind of money!”

This is one of the most persistent myths today. The 20% figure comes from the fact that when you put less than that percentage as a down payment on a home, you must pay an additional amount for Private Mortgage Insurance, or PMI, which is added to your monthly mortgage.

Of course it would be nice not to have that additional amount tacked on to your monthly mortgage, but we all know that saving enough cash to cover a 20% down payment is very difficult, especially for first-time buyers.

(In the Frederick real estate market the median home price is $337,000, which would require $67,000!)

This is why in America we have choices! There are a variety of loan options that allow for a low down payment. Virtually all lenders offer lots of choices for borrowers:

  1. FHA Loans (Federal Housing Administration) – available with a 3.5 percent minimum down payment.
  2. Conventional loans are available with down payments ranging from 5 percent to 15 percent. Some lenders offer special conventional loans for as little as 3 percent.
  3. There are usually a number of grants available to cover down payments for qualified borrowers. Programs are available for public servants, like fireman, teachers, medical workers and those who work in those sectors.
  4. VA Loans – Veterans and service members can purchase a home for zero down.
  5. State and local programs and rural programs are available to offer down payment assistance or other special loan options for low or moderate income borrowers.

Still having trouble saving 3.5 percent for an FHA loan down payment?

💸BS Fact #7:  “I keep hearing there’s a housing affordability crisis…how can I afford a house?!”

The news headlines are always buzzing with housing affordability woes, as well as warnings about housing bubbles. I’m convinced this is largely clickbait.

The National Association of Realtors® (NAR) calculates what is referred to as the Housing Affordability Index. This index measures whether the median household could qualify for a mortgage on a typical home using the prevailing mortgage interest rate. It uses a value of 100 to signify that a family with the median income has exactly enough to afford a median-priced home. It is calculated quarterly.

The Second Quarter 2018 Housing Affordability Index:*

  • The Median Priced for Single-Family Homes Nationally:  $269,000
  • The Prevailing Mortgage Rate: 4.70%
  • The Median Family Income:  $75,106
  • The Composite Affordability Index:  140.2 (which means the average family has 140% of the income necessary to qualify for a loan on a median-priced single-family home.

Sounds like affordability to me!

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😒BS Fact #8:  “I don’t need a buyer’s agent…I’ll get a better deal if I work with the listing agent.”

This BS Fact just Will. Not. Go. Away!

Here’s how the real estate selling process works:  The home seller contracts with a real estate agent to market their home. The seller and the agent agree upon a fee that the agent will charge the seller, usually a percentage of the sale price. There is no set fee in our industry because that is illegal, but each company has a policy. The listing agent then agrees to share that amount with any cooperating agents who may bring a buyer to buy the house.The BS of dual agency

That fee is an agreed-upon amount enumerated in a contract between the seller and their agent. It has nothing to do with a potential buyer.

If a listing agent contracts with a seller to lower their commission if they bring a willing and able buyer themselves, without a cooperating agent, it is required in Maryland to disclose that to all parties, potential buyers and their agents. This is called variable rate commission, and it is extremely rare. When this happens, in the majority of cases, the agent does twice the work (because there is no buyer’s agent involved) and takes the full, though reduced, commission. And the buyer, in most cases, simply lacks representation.

There is nothing in the agreement between the seller and the listing agent that signifies that a buyer to pay less for a house simply because they are not represented by another agent. That fee is for the agent to do with as they please. And lets face it, who wouldn’t keep it for doing twice the work?

Buyer Representation is Your Right…

…and it is a great benefit to a buyer, much more beneficial than the empty promise of paying less for a home when you work without a buyer’s agent. A Buyer’s Agent is an agent who works with a buyer, under contract. They have the fiduciary responsibility to represent the buyer’s interest, which includes getting their home of choice for the best price, with the best terms and conditions possible. They are their to negotiate on your behalf, so when you win, they win.

  • 💡In his article: Advice for Choosing the Best Realtor as a Buyer, Jamohl DeWald, Portland Realtor®, gives important tips. After all, it is probably the biggest financial decision most people make in their lives. Be sure to interview an agent before you choose them to represent you.

No one should go it alone in the real estate market! 😰 Get a Buyer’s Agent! Tweet That!

In many areas of the country, when the buyer is unrepresented and works with the seller’s agent, it’s called “Dual Agency“. In Maryland,  an agent cannot represent both parties ( Buyer and Seller) – it’s illegal. However, Dual Agency is permitted, but it is defined differently than in most other states. It applies to the”Broker” of the company. Dual Agency can only occur when a listing agent and a buyer’s agent, who both work for the same broker,  become involved in a single transaction together. The Broker becomes the “dual agent”. The only time a broker cannot be a dual agent is on his own listing.

Dual agency is fraught with difficulties, even if it is legal. Many agents do not practice dual agency, but avoid it for the legal jeopardy that sometimes can accompany the practice. A few thousand extra dollars is just not worth it.

  • 💡There is so much to say about Agency! Be sure to read this informative article from Bill Gassett, Metrowest MA real estate pro, Why is dual agency bad for home buyers? As Bill states,

    “Sadly, many consumers do not understand how consumer relationships work when it comes to buying and selling real estate. One of the worst relationships that can happen in some states is dual agency where a real estate agent represents both parties. Common sense tells you this is impossible, yet some states allow it. Dual Agency benefits one party – the real estate agent.”

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😱BS Fact #9:  “I saw some local real estate statistics…the market is Horrible!”

True Confession: I (Karen) was a Psychology major in College. (one of the most useless degrees, I know! give me a break!)
However, one required class was super helpful…it was Statistics. I barely passed, but you know what I learned? You can make a statistic say anything you want…if you spin it well. Especially if you are spinning your statistics for someone who isn’t well-acquainted with your subject.

Most of the time the statistics you find regarding the real estate market are not meaningful. They are either too broad to have any meaning to a local buyer or seller…as in the case of the national housing statistics we often see on the news, or from the National Association of Realtors®, or they are just a simple snapshot that doesn’t show the trend. It’s best to never take someone’s statistics at face value, but to ask a real estate agent to explain what they really mean.

  • 💡Seattle Real Estate agent Conor MacEvilly, has written a great piece about why several real estate articles about statistics should be recycled…immediately! I couldn’t agree more! Why Many Real Estate Market Reports are Meaningless spreads out a well-researched explanation of how statistics are misleading and what should be explained in a market report. Any meaningful market statistics require a long-range view of the housing market in a very localized analysis.
  • 💡And while we’re speaking of mis-leading real estate content, Conor has written a telling article that you’ll certainly want to read, Beware of These 5 Common Real Estate Marketing Tricks. Whether it’s the promise of incredibly low interest rates, or an agent promising to buy your home if it doesn’t sell, do yourself a favor, READ THE SMALL PRINT.

💰BS Fact #10:  “I can’t afford a house that would make my wife happy…😂

but I don’t have enough for a fixer-upper either.” 

There are often times when it’s hard to find a house you love and can afford. When the inventory of homes for sale is low, we see more bidding wars on houses that are in pristine condition and priced well for their markets. Bidding wars are not everyone’s cup of tea.

When you just can’t find your dream home at a price you can (or want to) afford, there is a solution: a renovation loan. There are two great products available from FHA:

  1. FHA limited 203(k). The borrower can borrow between $5,000 and $35,000 over the asking price to make minor repairs. The home must be the primary residence.
  2. Fannie Mae offers the Homestyle Renovation Loan, for more extensive repairs. Borrower’s can receive up to 50% of the home’s value, with up to 12 months after closing to finish repairs. This loan can be used for a vacation home or an investment property.

So, if you are facing some dismal choices in your market, you have other solutions. Find a home with good bones in a neighborhood you will love, and make it your dream home. If the home needs simple cosmetic updates, all the better!

 

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🏠BS Fact #11:  “I’m looking for a new construction home. I don’t need an agent.”

Good news…builders are building again. In Frederick Md, we’re seeing new home construction like we haven’t seen since pre-2006.

Did you know, when purchasing new home construction, buyers can have their own buyer representation? The real estate agent at the builder’s model home is the seller’s agent for the builder, representing the interests of the builder.

As a buyer, there are advantages to having your own buyer’s agent to represent your interests. Most builders, but not all, have built-in costs that cover the Realtor®’s commission.

  1. Realtors® who have experience with new construction know the questions to ask along all the phases of the build.
  2. The buyer’s agent can help you interpret and understand the contract.
  3. The agent can do a non-biased market analysis, one important and often overlooked item in new construction. Tip: Someone purchasing new construction needs to be dedicated to staying in the neighborhood for 2-4 years after the builder closes out, especially if the new buyer only puts 10% or less down.  The builder basically controls the value of the home until the neighborhood is closed out.
  4. Many things are negotiable, whether the builder offers or not. Using an experienced buyer’s agent can be a benefit in any negotiations. Agents negotiate every day as a part of their job. How often do home buyers engage in negotiations?
  5. Market conditions greatly dictate a builder’s incentive to make deals. A buyer’s agent can help you know when market conditions are right for these benefits.

🤯BS Fact #12: The Most Insidious BS Fact of Our Time –  “Guess what Mom!? I’m going to make a ton of money flipping houses!!”

BS Facts about real estateWarning: I may step on some toes.

Have you seen the incredible number of house-flipping seminars taking place all over the country?? Some of them charge hundreds of dollars to attend. Then they charge thousands for their “proprietary software” and “proven systems” for making a killing flipping houses. Do the math people…the only ones making money are the shiesters in front of the room, taking your money. Many of these “get-rich-quick” house-flipping seminars are nothing but a scam.

Here’s what they don’t tell you: When the inventory is tight like it is in many areas across the country, finding a home that makes a perfect flip is hard. Ten years ago, when we had a glut of foreclosures, it was a different story.

You’ll also find it’s not so easy getting financed. But a hard money lender will be happy to finance your flip…for about 30% interest rates!

Flipping is difficult, but I didn’t say it was impossible. It certainly isn’t a “get-rich-quick” scheme. If you want to make money flipping houses, do your research and go in with your eyes wide open.

📚Related Articles:

  • 💡Greater Metrowest Massachusetts real estate pro Bill Gassett has written an informative article for buyers and sellers:  Pros and Cons of We Buy Houses Flipping Companies, which pulls back the curtain on those house-flipping scams. As Bill points out, speak to a local Realtor® before you consider one of those “We Buy Houses” companies. They are more than happy to help themselves to your equity!
  • 💡If you are serious about making house flipping your new gig, be sure to read this article by fellow eXp Realty agent John Cunningham: How to Build Your Own House Flipping Team. “The team that you put together is everything. Build the right team and enjoy success. Build the wrong team and you will not be able to get out of the flipping business fast enough.”

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Yet Even MORE B.S. Facts About Real Estate that Just Won’t Die! was penned by Chris and Karen Highland, eXp Realty, LLC, Central Maryland Realtors®. And we had a blast dispelling real estate myths! Contact us for any real estate need. 301-401-5119.

B.S. about real estate not true

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*Copyright NATIONAL ASSOCIATION OF REALTORS®. Reprinted with permission.

The Dark Side of Get-Rich-Quick House Flipping Seminars

The Dark Side of Get-Rich-Quick House Flipping Seminars

“Guess what Mom!? I’m going to make a ton of money flipping houses!!”

Warning: I may step on some toes. (and you’ll have to put up with a bunch of emojis) But hear me out!

When I run into someone who has been to one of those get-rich-quick home flipping seminars and is going to “crush it” by flipping houses, I just get sad. 😢 I recently met someone who spent $7,000 on a home-flipping website, over and above the $8,000 they spent on the program. (What in the world do you need a website for??) Sometimes I move from sad to angry when I hear those stories, because I know someone just got ripped off. 😠 That’s what prompted me to write this post.

Chris and I went to one of those home-flipping seminars last year. We were just curious. After 90 minutes of hard-selling, fast-talking, fist-pumping rhetoric, they had a 15 minute break… and we ran out of there like our hair was on fire! I’m not kidding!

Knowing our local Frederick market as Realtors®, we realized that almost everything they were saying about buying houses and flipping them was either over-simplified, or it was misleading… and some of it was patently false! The only people making money that day were the seminar people. They sell their “proven system” and “proprietary software” and their ongoing coaching, for a pretty penny!

And no worries…if you can’t get financing, they’ll lend you money at a 30% rate! They spent a good chunk of time trying to convince everyone that the interest rate doesn’t matter as long as you’re making all that money! 🤯 We used to call that USURY!

Caveat: Fixing and Flipping is Legitimate

Don’t get me wrong, there are legitimate ways to invest in real estate by purchasing a home in need of “fixing and flipping”. It’s even a necessary part of the housing industry, in my opinion. Between 2008 and 2013 there was a lot of distressed housing around the country that needed to be bought, renovated and sold. In large part, investors did that work and helped the economy and the housing market.

What most inexperienced people know about home flipping is only what they see on television. Unfortunately, the home-flipping TV shows don’t really show the reality of the business. Yet, we’re seeing a regular line-up of seminars from the real estate gurus teaching their own special systems for easy, no fuss, get-rich-quick house-flipping programs. Your mother probably told you if it sounds too good to be true, it probably is. 🤨 Everyone should listen to their mother on this one.

Flipping houses is hard work, and people don’t get rich from it. It’s usually something they do alongside a career or business. Sometimes house flippers do very well and move on to something more, like developing, or residential or commercial real estate. Sometimes they lose their a$$. It’s something that you need to learn a lot about before you dive in.

Flipping Homes Can Be High Risk

Home-flipping is a high risk business, especially for someone new to it. To have a successful flip, the stars must align:

  • The home has to be priced low enough for the investor to make a profit.
  • The amount of work that needs to be done can’t be so much that there is no profit.
  • The investor has to have a team of professionals with the skills to get the job done. But they can’t spend all their profits on that team. There has to be enough margin in the entire project. As it is, margins are already slim in house flipping.
  • There has to be a demand for the home when it is renovated. If you over improve, you risk not being able to sell the house for what you have into it, then you’ve lost money. If you under improve, you risk the house not selling.

Sad Story of Flipping Gone Wrong

We went to a broker’s open last month for one of the agents in our company. (A broker’s open is a collaborative event where real estate agents come to another agent’s listing and give their advice on the price and marketing of the home.) Unfortunately, the home was a flip that didn’t go very well. The flipper spent entirely too much on the home renovations, and although it was well appointed for the neighborhood, there were some trouble spots. The lot was next to the interstate and the noise was a real problem. The highest sale of comparative homes in the neighborhood was $440,000 to date. He needed $500,000 just to break even. Predictably, he was holding out for his price, but the longer the house sits on the market (not selling) the more carrying costs add up. He needed to stop the bleeding. 🤕

This happens more often than you’d realize. And this was an experienced flipper. The problem was he didn’t know the local market. If he had, he wouldn’t have bought the house. He ended up overpaying because he was in a bidding war. He thought he could sell it for a higher price, because he didn’t do the due diligence to understand the local market.

Flipping Homes Can Be High Cost

Many experienced flippers buy a fixer-upper and have great intentions, only to get into the home and find surprises. A cracked foundation, rotten sub-floors from long-time leaks, mold, termite damage, electrical problems, and the list goes on. Many times these surprises cost money to fix that they didn’t plan in their budgets. Bye-bye profits. 💸

We have a friend who is more than 12 months overdue on a flip because he ran out of money due to unforeseen problems. He’s working on each item as he gets the money, but meanwhile, the carrying costs are eating away at his funds and his peace of mind.

Flipping Homes is NOT a Passive Endeavor

That’s probably the most misleading promise you’ll ever hear in these flipping seminars. It’s anything but easy. A flipper must be involved every step of the way. You must research the market and know what homes are selling for. You must locate the right home to flip, for the right price so that you can make a profit. In a successful flip, you must understand the scope of work the home needs and budget for it. You must find the contractors and take bids. If you’re financing the flip, this all has to be done before you can even get the loan and buy the house. And you have to calculate in the holding and carrying costs. In essence, you are the project manager. 👷‍♀️

Even if you aren’t doing the physical labor yourself, it is imperative that you have an understanding of construction. You also need to know about local laws and regulations, as well as about taxes and the process of selling the home. You are not only the project manager, you are the real estate guru. Additionally, successful flippers know what buyers want and what real estate trends are in that given location.

The big risks in flipping are
1. determining the present and potential value,
2. correctly planning the renovation costs, and
3. having the right team of professionals to help. 

 

Flipping Homes Successfully takes a Team

One of the risks in flipping is getting in business with the wrong partner. You never really know how a contractor is going to work out until you use them. There’s nothing more frustrating than getting a project started and finding the contractors are lacking in the skills and knowledge that you need. There’s nothing worse than seeing a home where a contractor made a mess of something and just walked away. Bye-bye profits. 💸

I know I’ve painted a picture of doom and gloom. But, as I said, flipping is an important part of the housing industry. I’m all for it. I just hate to see good-hearted people being ripped off with promises that just aren’t realistic.

That being said, people have been successful flippers for decades. There’s almost something noble about it…taking a run-down asset and making it pretty and livable again. Providing a place for someone to call home. 😊

  • If house flipping is going to be your new gig, be sure to read this article by fellow eXp Realty agent John Cunningham: How to Build Your Own House Flipping Team.  John’s top tips: 1. Consult the Better Business Bureau,  2. Make sure the contractor is a prompt communicator, and 3. Make sure the contractor is licensed and insured. “The team that you put together is everything. Build the right team and enjoy success. Build the wrong team and you will not be able to get out of the flipping business fast enough.” And of course, consult a local real estate agent for advice on the local market.

 

Success at Flipping Homes Depends on the Local Market

Every home is different and every market is different. That’s why it is laughable that these seminar people show up promising their “proven system” will work like magic. What works in Las Vegas does not work in Frederick Maryland!

Remember how often we’ve said that All Real Estate is Local? The same is true for flipping.get rich quick house flipping seminar

Here’s what they don’t tell you: When the inventory is tight like it is in 2018 in many areas across the country, finding a home that makes a perfect flip is really hard. Investors are in competition with everyone else. If someone has a home that needs work, if they’re paying attention, they know the market is tight and inventory is low. They are probably going to list it on their local MLS with a Realtor® so they can get the most for their home.

Flippers will often find themselves in competition with a buyer looking for a personal residence. Most often that buyer will be willing to pay more than the investor. They’re not considering margins like the investor is. They don’t need to consider making a profit at resale.

Incidentally, you can all the “proprietary software” available, but if the inventory of homes in need of fixing isn’t there, it’s just not there.

What I Want to Say Most About House Flipping Seminars…

Although flipping is difficult, but I didn’t say it was impossible. It certainly isn’t a “get-rich-quick” scheme. It’s hard work and it takes a lot of knowledge about a lot of things. It’s actually better if you’ve already been an investor for a few years and you know the ins and outs of what people are looking for. It also helps if you have construction experience…even if, at least to mitigate against over-improving, or at worst, to keep from getting ripped off.

If you want to make money flipping houses, do your research and go in with your eyes wide open. And DON’T 😨 waste your money on some get-rich-quick house flipping seminar!


 

Have You Been Approached by A “We Buy Houses” Company?

You’ve probably seen the signs as you drive around town, “We buy houses…” in hand-scrawled print. Don’t buy into it! Please do yourself a favor and consult a local real estate professional about your home value first. Not all investors are bad people, of course, but some people are. Protect yourself from the bad ones who want to take advantage and help themselves to your equity. You may have equity, you may not, but you deserve to know what is at stake.

Greater Metrowest Massachusetts real estate pro Bill Gassett has written an informative article:  Pros and Cons of We Buy Houses Flipping Companies, which pulls back the curtain on the house-flipping scammers we’re seeing. As Bill points out, speak to a local Realtor® before you consider one of those “We Buy Houses” companies. And be cautious when you are considering purchasing a flipped house!

 


 

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Do you live in another area and need a real estate agent? We’ll be happy to refer a top-notch agent! 

 


 

How Do I Know if This Neighborhood is Safe?

How Do I Know if This Neighborhood is Safe?

🏘️Neighborhoods Are Important

Today’s home buyers are looking for a lifestyle as well as a house. The neighborhood is a major consideration, especially knowing that the neighborhood is safe. I think I’ve been asked the question about whether a neighborhood is safe more times than I can count.  Unfortunately, as much as we may have opinions to give people, as Realtors®, we can’t give those kinds of recommendations.

There are laws that keep me from making “representations as to the ‘quality’ of a neighborhood”.

Not only that, but paragraph 49 of the Maryland real estate contract keeps me from ascertaining any information regarding criminal activity or presence of registered sex offenders.

Paragraph 51 keeps me from “making representations” with respect to the following:

  • Water quality
  • State of sewage disposal sytems
  • Assessments of public utilities
  • Details of the lot
  • Existing zoning
  • Soil conditions, flood hazard area, covenants, HOA issues…
  • and the list goes on for about 1/3 of the page.

🤓Realtors® Are Experts… of a Sort…

As much as I have opinions about EVERYthing, because I’ve lived in Frederick County for 28 years (but mostly 😉 because I am opinionated) the truth is…I don’t really know.  As a real estate agent, I’m an agent to a transaction, not an expert in all the details of Frederick living. If I make any kind of representation, and I turn out to be wrong, buyers and sellers have made important life decisions based on my wrong information. 😨 The results can be = ruining someone’s financial prospects for a period of time, as well as their well-being.  If this were to happen, at best, people wouldn’t like me much, at worst, I could be sued. 😱

When a real estate agent offers advice on anything outside of the scope of their license, whether it is offering an opinion on the discovery made in a home inspection, or even if it is as simple as which school district the resident attends, they are on dangerous ground. These are items that are not in the expertise of the agent.

The expertise of an agent is this: in the transaction, in the negotiation, in the marketing of homes, and in representing their client’s best interests. Maryland law and the National Association of Realtors® Code of Ethics spells this out clearly:

Realtors® shall NOT “advise the public on matters outside the scope of their real estate license”.

One thing I can and will gladly do…is point you to the sources for the answers to your questions.

Here are a few good ones:

⚠️How Do I Know This Neighborhood is Safe?

Frederick County Sheriff’s Website.  This has some interactive maps that are excellent resources.

Surrounding Areas

📞Pick Up the Phone

You can also call the police department closest to an address you are looking at. Ask them about a neighborhood… it’s their job!

Once (15 years ago or more) Chris was showing a beautiful home to a buyer…newly renovated to-the-nines! The buyer noticed the back fence had barbed wire along the top and asked about it. We not only had no idea, we couldn’t account for it, so we gave them the number of the nearest police station. The next day they reported to us all the gory details of drug sales in the alley behind the home. Buyers MUST do their due diligence! (and needless to say…they kept looking.)

🚸Frederick Schools are Tops!

School districts definitely have an impact on home values. We’ve known for years that good school districts attract young families with children. However, recent studies show much more to the story.

According to a recent Realtor.com study, homes in the best school districts, on average, sell for higher prices than similar homes in less-popular school districts. There is a correlation suggesting that more affluent people buy in the best school districts. It would certainly seem that good schools affect home values, even probably that they protect home values.

If you’re researching Frederick schools:

Additional Reading: Top Ranking Frederick County High Schools

 


 

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🏘️Learn more about Frederick Neighborhoods 

  Need A Real Estate Agent in Your City? We Can Refer a Great Agent!


                

Chris Highland , eXp Realty – Specializing in Frederick County Real Estate
301-401-5119 Cell,
888-860-7369 Broker

Are Home Values Going Up or Down In Frederick Md?

Are Home Values Going Up or Down In Frederick Md?

HOME VALUES ARE ON THE RISE IN FREDERICK MD

A frequent question we get: Are home prices going up or down in Frederick Md? Every home owner is interested in knowing, and every potential home buyer is also wondering what the real estate market is doing. Although we can’t predict the future, we can analyze the trends and see what’s been happening to home values over the last few years.

We are often asked where we think home prices are headed over the next year. Recently, several national groups have published reports and given their predictions about the level of appreciation we can expect by the end of 2018 and into 2019.

Here is what they said:

  • USA Today Economist:  5.7% appreciation by the end of 2018
  • Urban Land Institute:  Survey respondents expect home prices to rise an average of 5.3 % in 2018 and 4.3 % in 2019, both above the 20-year average annual growth rate of 4.0 percent.
  • Home Price Expectation Survey:  4.1% in 2018
  • Clear Capital:  Looking back, Year-over-year gains from mid-year 2017 to mid-year 2018 was 7%.
  • Forbes:  Home price appreciation will slow to 2% over 2018

All five publishers are calling for home values to rise through the end of this year. The projections are that the increases will slow compared to the last five years. However, no one projected the increases that we’ve seen in previous years, as far back as 2013.

But any news with a + sign is good news to Frederick home owners. As you know, all real estate is local. National statistics don’t always show what is happening locally.

What about the market in Frederick Real Estate?

Much of the outlook depends on the simple formula of supply and demand. The inventory of homes on the market in Frederick Md continues to be low, although we’ve seen about 8 – 10% increase over last year. Right now there are about 1020 homes on the market and 737 are in process of selling (pending). A normal inventory for Frederick County is about 1200.

It’s Mid-Year 2018. So far in 2018, we’ve seen an average increase in:

  • average home price has increased 6.01% since the beginning of the year. ($331,581)
  • The median sale price increased 7.45% on average. ($308,500)
  • The Days on Market, or the time it took to sell a home decreased an average of 13.82% since January. 54 days on average.
  • The number of homes that sold was very close to last year, so far 1% fewer homes sold. 2133, compared to 2156 first half of last year.

What Can We Expect for 2019?

the future of home valuesOf course, we don’t claim to be Zoltar, but we can safely project more increases. We expect:

  • Steady demand throughout the remainder of this year,
  • More homeowners putting their homes on the market as they see appreciation, although the inventory is still low, which contributes to price growth.
  • Increased demand next year as new households are formed, a result of economic growth (4.1% GDC in the second quarter 2018!)
  • More move-up buyers.
  • A Healthy, steady market over-all. 6.01 is a healthy growth number.

A Note About Real Estate Bubbles

All major news outlets like to wring their hands about real estate bubbles since the Great Recession of ’08. While it makes great headlines, most real estate experts don’t have the same fears. All of the aspects which attributed to the last real estate meltdown are not in play anymore.

  • Credit has tightened up, it’s difficult to get a mortgage without decent credit
  • Loan programs have changed from the dangerous, easy-access types of loans that were available before the crash
  • Home prices have increased, but should be much higher based on inflation
  • Foreclosures are very low (76,480) compared to the height of the crash in 2009 (566,180) [According to this CMED Report]
  • Housing is still affordable, in spite of what you read in the headlines.

“The main reason the typical mortgage payment remains well below record levels in most of the country is that the average mortgage rate back in June 2006, when the U.S. typical mortgage payment peaked, was about 6.7 percent, compared with an average mortgage rate of about 4.4 percent in March 2018.” Core Logic Report

 

Real Estate Sales Are Seasonal

During the winter months, many home sellers take their homes off the market for the holidays. The market slows down a little, but there have been months and years when the market activity defied the usual market…you never know.

We expect to see a steady market throughout the fall and winter, although not as active as the spring and summer. How much? A healthy number. There is pent-up demand among buyers who have been waiting for the economy to improve. There is pent-up demand among sellers who have been underwater on their mortgages. As home prices improve gradually, more sellers will enter the market.

If you have been waiting for the improving market to sell your home, this may be the year for you. Contact us for a free market analysis of your home.


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How to Negotiate Multiple Offers On Your House

How to Negotiate Multiple Offers On Your House

🤼What Happens When You Get Multiple Offers on Your House?

In the real estate market today, homes that are priced well and in the best condition often get multiple offers. Often in the first few days they’re for sale. It’s a seller’s market in Frederick Maryland. How can a seller best negotiate with multiple offers on their home? How can a buyer negotiate to win when there are multiple offers? Here are 15 tips:

The real estate market transitions from a buyer’s market to a seller’s market often over the years, depending on local economic trends. In Frederick, we’ve transitioned to a seller’s market over the last few years. The lack of inventory and the healthy demand has created an environment where we’re seeing a good number of multiple offers in the Frederick real estate market. Homes that are in great condition and that are well-priced for the market are in demand. In certain price ranges, those high demand homes are getting multiple offers. Here are some tips to negotiate when you have multiple offers on a house:

🏡Local Frederick Market Conditions

While first time home buyers are entering the market, and the first tier of move-up buyers are seeking homes, homes in these price ranges are in high demand. Buyers should expect the possibility of facing a multiple offer scenario. There is a portion of the market that is seeing a longer time on market for the lack of demand: the price ranges above $600,000. In certain neighborhoods in the smaller, outlying cities in Frederick County, the market is also slower.

But I need to mention a caveat…some neighborhoods are experiencing a different trend. Urbana real estate is selling in the higher price ranges than the rest of the county. Understanding your local market is important to establish correct expectations, which will make a huge impact on your negotiating strategy.

When we talk about real estate markets, buyers and sellers need to be aware that there is no such thing as a “National Real Estate Market.” Although much of the news talks about national trends, those statistics don’t reflect what is going on in your own local area. All real estate is local.

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🙋Tips for Buyers in a Multiple Offer Scenario

A few years ago, if a buyer missed out on a home, they could just wait for another comparable home to come on the market soon afterward. In today’s market, they can’t count on that happening. With the lack of inventory, if a buyer misses out, they can’t be so sure a similar home will appear any time soon.

Although interest rates are still low, home prices are starting to rise. Buyers will want to take advantage of these low rates instead of waiting. To win out in a multiple-offer scenario:

  • Taking the time up front to get qualified by your lender is great advice in a hot seller’s market. When you submit an offer, the fact that you have been qualified, rather than just “checked-out” by a lender will add weight to your offer. It certainly increase the seller’s confidence in your ability to follow through on a contract.
  • When you see a home that you like, don’t wait too long to see it. You have to be flexible and make time to see a house as soon as possible. Unfortunately, we’ve had many situations where our buyers scheduled showings a week out, only to find the home was under contract before they got a chance to even tour it. Even though some people prefer to take their time and not be pushed, they find that they often miss out in a bustling seller’s market.
  • When you find the home that you want to buy, make an offer. Don’t hesitate to pull the trigger. You want to be the first offer. In doing so, you just might get the home. So you really need to know your mind.
  • Buyers should strongly consider offering more in a competitive situation, rather than insisting that they get a deal. The days of getting deals are behind us, especially in a high-demand market. Your insistence on getting a bargain will most likely leave you out in the cold.
  • If you find that you are in a competitive situation, you may get the chance to change your offer if a seller asks for the “highest and best”. You may want to increase your offer, or you may want to edit your contingencies, or increase your deposit, or a combination of all of these. It really depends on the situation. This is not the time to equivocate if you really want the house.

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    😢Don’t Over Negotiate

    how to handle multiple offers in real estate

  • Your buyer’s agent should be a good source of advice in a multiple-offer situation. Be sure to choose an agent who knows the neighborhoods, the values and the current market trends. Negotiation should be one of your agent’s strongest skills. Understand that your buyer’s agent’s advice is based on past experience and is not a guarantee of any particular outcome.
  • Be flexible on your timing. If the seller needs time to find their next home, your offer will be favorable if you give them that time. If, on the other hand, the seller needs to move quickly, make sure you move as quickly as you can. This is another great reason to take the steps necessary to be qualified with your lender before you make an offer.
  • If possible, get to know your seller’s motivation. A good buyer’s agent will work with the sellers agent to figure out how to create a win-win scenario for all parties. When negotiating with a motivated seller, it helps to find out what they desire most, and work that into the negotiation.
  • If you are selling your home and buying…it may be scary, but in a competitive offer situation, you will most likely need to have your home already sold. You will be in competition with other buyers, many of whom may not have a home to sell. Plan to put your best foot forward. Anticipate the competition and make your best plan. See more tips: Advice for Buyer’s When the Real Estate Market is HOT!

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🤔Tips for Sellers in a Multiple Offer Scenario

Although it is a seller’s market here in Frederick Md, as in more and more areas of the country, sellers can’t assume that they can get an unreasonable amount for their home. Read more about a buyer’s or seller’s market. Even if there are multiple offers, there is a limiting factor to those escalating offers. The house must appraise for the amount it sells for. The appraisal is sometimes referred to as “The Second Sale.

The appraisal is based on the most recent sales, usually 3 to 6 months, so those sales are likely going to be less than yours in an appreciating market. Although appraisals can ‘stretch’ to higher values, so-to-speak, to expect a price that is a large leap from the previously sold homes is unrealistic.

✔️✔️✔️Many Negotiating Points

When a seller considers all offers, they’ll want to consider more than just price. Although of course the ideal scenario would be to get the highest price, there are other issues to think about. Your negotiating strategy will need to be reviewed with each potential buyer. Other important considerations are:

  • The buyer’s down payment. Sometimes a higher down-payment signals a more serious buyer.
  • The buyer’s contingencies. If you have multiple buyers, you should compare the details of the contingencies. Time frames, inspections, and other negotiating items should be considered. If you find something you can negotiate with, while the other items are agreeable to you, you may have a better chance at a win-win.
  • The buyer’s financing situation. Your agent should be able to fairly vet their financing, including the lender and the loan program. We have had situations where we advised sellers to choose one offer over another based on the veracity of the buyer’s financing, as well as the reputation of their lender.
  • The buyer’s need for closing cost assistance. Many first-time buyers may not have the cash to cover all the requisite closing costs. You may find that the buyer who doesn’t need any assistance may be your best offer. You also may get an offer higher than your price to cover the extra needed for closing cost assistance. Both are worth consideration.
  • The buyer’s ability to deal with the situation of an appraisal that comes in low. It can and does happen in an appreciating market. If you want to try to get the highest price possible, make sure you know the risks of not getting an appraisal to corroborate that high price, and make a plan with your agent to deal with that scenario.
  • As with a buyer’s agent, your listing agent has advice for you based on their past experience and can’t guarantee a particular outcome. The real estate transaction has many moving parts. Additionally, every buyer has their own set of goals, values and personalities, making each situation somewhat unique.

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😃A Realtors® Experience Matters

Whether a buyer or a seller, you should expect fair and honest treatment throughout the offer and negotiation process, coupled with prompt, ongoing and open communication. Always remember to keep your eye on the goal: buying or selling your home. No real estate transaction will ever be perfect. Remember not to let emotions rule and you’ll have the best chances of a win-win.

Make sure your Realtor® has experience in transitioning real estate markets, or if they are new to the industry, that they work on a team with other seasoned agents. A skilled, local real estate agent can help you tremendously as you navigate any market, whether a buyer’s or seller’s market, or a transitional market.

😅Best and Last Tip: Keep a Cool Head in Negotiations

Buying and selling a home is a process that includes emotions. Sometimes negotiations can make people tense. Although the real estate transaction is a financial process for both parties, it is also an emotional process.

Sellers: Detach from your nest. Remember this is an asset consisting of bricks and sticks.

Buyers: Even though you’ve fallen in love with the house and envision your future there, keep it under wraps! The dream won’t come true unless you make it to the finish line.

Contact the Highland’s for real estate representation in a seller’s market. 301-401-5119.


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Chris & Karen Highland
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Negotiating with A Motivated Home Seller

Negotiating with A Motivated Home Seller

💬How to Negotiate When Buying A Home

Most home buyers might not realize that when you are searching for a home, the negotiation starts before you even tour the home. That’s right. Then it continues until the day you close on the home, because anything can happen throughout the home buying process. Before a buyer even starts looking for a home, there are several steps of preparation they need to make to be a strong negotiator in a real estate transaction.

You’ll notice that the title of this article includes the word “motivated”, and there is a very important reason. A seller’s motivation has everything to do with their willingness to negotiate. A seller who insists on their own set of preconceived parameters is not likely someone who will negotiate. When negotiating with a motivated home seller, your best asset will be your buyer’s agent.

💪Use An Experienced Buyer’s Agent To Negotiate From Strength

Real estate negotiating in is not an everyday occurrence for most people. In fact, we don’t often negotiate in our everyday shopping experiences. We don’t stand in line at the grocery store or the clothing store and haggle with the checkout employee over the prices of the products. We either buy, or we don’t.
Real Estate Negotiation
On big items, like cars and houses, yes, we do negotiate. For most of us, we’re glad we only do that every few years; people buy and sell real estate every 9 or 10 years on average. Negotiation is not a skill that most consumers use every day. That muscle can atrophy over time!

For a real estate agent, negotiation skills are one of the top skills necessary for success. [imho] Unlike the car dealership, a successful negotiation in a real estate transaction happens when all parties reach a conclusion that they are satisfied with. We like to call it a “Win-Win”.

Finding a Buyer’s Agent who is skilled in negotiating is a great start to buying a home. A buyer’s agent is extremely valuable to you, as they are representing your best interests.

In Maryland, without a written agreement with a buyer’s agent, any agent involved in the process is working for the seller. That means they are representing the seller’s best interest. Anything that you confide in the agent is fair game for them to use to the seller’s advantage.

Your buyer’s agent should be a trusted adviser. Use your agent and take advantage of their market analysis and their negotiating expertise. Remember, as local real estate professionals, we are steeped in the market every day. Negotiating is what we do…365/7. Read more about Buyer’s Agency in Maryland.

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😕Negotiations in Real Estate Are Complex

real negotiating is about a lot more than price

Negotiating in real estate is not like negotiating in the street market, or across the desk from a car salesman…thank goodness! When negotiating with a motivated home seller, there are many negotiating aspects to consider.

One of the misconceptions we hear is that negotiating a home sale is all about price.  While it certainly is the main concern for both parties, there are several other considerations that influence a home seller’s acceptance of an offer.

A real estate transaction has several moving parts. It’s a process, not an event.

✔✔✔Some Negotiating Factors To Consider:

Deposit:  The Earnest Deposit is necessary to have a completed contract in Maryland.  The amount is negotiable, but the higher the amount, the better the buyer looks to a seller.  In a day when financing is tightening and more deals fall out due to a buyer not being able to get their loan, a higher deposit amount can signify to a seller that this is a buyer who is more likely to be qualified.

Financing: Related to the earnest deposit, your financing is something the seller is going to be very concerned about.  When you present an offer, you must have a pre-qualification letter with it.  Make sure your pre-qualification is with a strong local lender, whether you end up using that particular lender or not.  This speaks well of your ability to perform on a contract to purchase.  Stay away from internet lenders!

♠ ♣ ♥ ♦

I like the “reach out and strangle them rule”…if a lender drops the ball, we like to be close enough to … have access to them! I once sat in a lender’s office all afternoon to get a buyer’s $500 fee back. The lender knew the buyer wouldn’t qualify for a particular loan, but took their money anyway. That’s just not right.”  ~ Chris Highland

♠ ♣ ♥ ♦

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👍One Step Ahead – Pre-Approval

Along those lines, having an “approved” status with your lender goes a long way when your offer is being considered. Having the approval of your lender, not just a pre-approval letter, will signal to the seller that as a buyer, you are a safe bet. Many of our buyers are seeing the value in starting the process of loan approval early on in their home search, so that by the time they find a home and make an offer, they are further along in the loan process than a buyer who just has a pre-qualifying letter. When negotiating with a motivated home seller in a competitive real estate market, having this edge over the competition is extremely helpful.

Negotiating with A Motivated Home SellerClosing Date: Knowing the home seller’s plans is helpful when considering a closing date. With today’s timelines, we always recommend a minimum of 45 days from contract ratification to closing. It’s very difficult to shorten that period of time, not matter what you’ve heard.

If the seller has a tight deadline, then the shortest time possible will probably receive a more favorable response from the seller.  (Another reason to already be qualified with the lender!)

On the other hand, if the seller lives in the home and has to find his next home purchase, the opposite could be true. Knowing the sellers’ next intentions can be very helpful when time-lines are considered. An experienced buyer’s agent who is negotiating on your behalf can help tremendously.

Contingencies:  The more contingencies loaded into an offer, often the lower the chances of acceptance, especially a home-to-sell contingency.  It’s almost always best to have your home under contract and present a house-to-settle contingency. Having a contract on your home with a strong buyer will also go a long way. In a competitive seller’s market, like we’re seeing lately, it’s even better to have a home that is sold, if you can manage the interim housing need.

Motivation: Sellers have all kinds of motives for placing their home on the market.  Although it would be a negligent listing agent that would spill the beans about their seller’s motives to everyone, a good buyer’s agent can get the meaningful information.

If a seller is relocating for any reason, their motivation to get their home sold is probably strong. If they have a time-frame in mind, they are probably motivated to meet a goal.

On the other hand, if the home has been on the market for two years, and the seller has burned out three real estate agents, but has not lowered their price…chances are, they’re not very motivated.  Along with motivation, you can often judge their willingness to negotiate.

Ability to Negotiate: All parties should be willing to negotiate and should come to the transaction with a certain level of open-mindedness.  Unfortunately, we sometimes find that some people just aren’t very flexible about much.  Then the buyer needs to decide how badly they want THAT house. People come in all types…some are of the inflexible type. When that’s the case, its best not to exhaust your energy and emotion on a fruitless endeavor.

Sometimes, the seller just doesn’t have room in their budget for much movement on the price. In that case, they will be more willing to move on other issues, like dates and inspection results. Again, an experienced buyers’ agent will help you in the negotiating.

Inspection Negotiations: After the initial negotiations are done and the contract is ratified, you may think you’ve finished with negotiations. But wait…there’s more! After home inspections, there will be a new opportunity for a “meeting of the minds”. The results of a home inspection, pest inspection, well and septic if necessary… depending on the results, any fixes or monetary solutions to possible problems will all have to be hashed out. Hopefully all parties will be even more motivated to agree to a win-win solution.
Negotiating with A Motivated Home Seller

Closing Cost Help

Sometimes, asking for help with the closing costs is possible. Sometimes, when there the home seller doesn’t much room in the price, the seller will not be able to help. In either case, some give and take on other issues, like time-frames, or home repair requests, might be the key to a win-win.

There are many ways to negotiate a contract that result in a scenario where both the seller and the buyer get what they want most, and thereby make the transaction possible. When negotiating with a motivate home seller, there is always an answer that will work to create a win-win for both parties.


Additional Reading: John Cunningham, eXp Realty agent in Phoenix AZ, has written a good article explaining the ins and outs of the real estate counteroffer. His advice: Nail the Price Before Negotiating. Do your homework before you make the original offer.


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🏡Negotiating Tips for Home Buyers

  • When Negotiating in Real Estate, Don’t Let Emotions Rule. It’s true that often people buy emotionally; if you don’t love the house, most likely you shouldn’t buy it. But emotions need to be in check when you’re negotiating. Rational heads make the best decisions. We’ve seen people get emotionally worked up and lose sight of the end goal, while standing on principle over a small matter.
  • Keep Sellers in Mind. You can never underestimate the stress that can affect a seller’s state of mind. There are many variables that are out of a seller’s control when it comes to selling their home…and that alone can be unnerving. Keeping a calm and respectful demeanor can go a long way in the negotiations.
  • Don’t Insult the Seller with A Lowball Offer. Just don’t do it. Read more here. You will very likely end up with no response at all…then there will be no negotiation.
  • Use a Skilled Buyer’s Agent. Your buyer’s agent should be a trusted adviser. Use your agent and take advantage of their market analysis and their negotiating expertise. Remember, as local real estate professionals, we are steeped in the market every day. Negotiating is what we do…365/7.

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Contact us to help you negotiate your Frederick Home purchase.

Chris & Karen Highland
eXp Realty – 301-301-5119

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negotiating with a motivated home seller

Rent Vs. Buy 2018 – Explaining Housing Affordability

Rent Vs. Buy 2018 – Explaining Housing Affordability

🏘Explaining Housing Affordability

RENT VS BUY. Is 2018 your year to buy a home? We’ve spend 25 years helping people in Central Maryland answer that question. Usually, the answer is based both on math and economics, and on your personal situation. First, lets talk about the math…affordability. What exactly does the term “Affordability” mean?

The National Association of Home Builders (NAHB) and Wells Fargo have been calculating the Housing Opportunity Index (HOI) for more than 30 years. The surveys are released quarterly and take into account two things, income and housing. The survey covers 237 metropolitan areas across the U.S. as well as the national averages. According to the latest HOI survey released on May 10th, rising wages have offset rising home values and interest rates, boosting housing affordability.

The latest HOI data show “61.6 percent of new and existing homes sold between the beginning of January and end of March were affordable to families earning the U.S. median income of $71,900. This is up from the 59.6 percent of homes sold that were affordable to median-income earners in the fourth quarter of 2017.”

➗How is the HOI calculated?

The housing cost calculation takes into consideration the price of homes and the interest rate. Today’s low-4% rates have made a huge impact on housing affordability. “Average mortgage rates rose by nearly 30 basis points in the first quarter to 4.34 percent from 4.06 percent in the fourth quarter of 2017.” Remember,these rates are still low compared to historical rates, which average around 7 percent. To understand the impact of interest rates on affordability, read this handy chart: Interest Rates and Home Affordability.Rent VS Buying a Home - explaining housing affordability

For income, NAHB uses the annual median family income estimates published by the Department of Housing and Urban Development. They use the figure of 28% of gross income as an average amount home buyers can afford to spend on housing. Divide the 28% of average income by 12 to come up with a monthly amount allowable for a mortgage. Keep in mind that FHA limits are 31% for mortgage costs.

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⚖Affordability in Frederick Md

When explaining housing affordability, remember that local markets are different. While the National Affordability Index is at 61.6%, the local markets vary.

Washington DC, NVA, MD HOI

Frederick is a sub market of Washington D.C., which has an affordability index of 70.6%. The median income for the D.C. area is $$112,792, the median home price is $560,000.

Frederick MD HOI

The median income for Frederick Md households is $65,967, according to Google, and the median home price in Frederick is $325,000. Incidentally, without an exact number, I’m willing to guess that the affordability index for Frederick is similar to Washington D.C., Rockville and Bethesda, primarily because of home values.

Hagerstown-Martinsburg MD-WV HOI is 84%. The median home price is $149,000; the household income is $55,862.

Incidentally, the MOST affordable area is Cumberland Maryland, where 98.5% of households can afford the median priced home of $80,000.


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🏡Should I Rent or Buy in Frederick Maryland?

Given the fact that Frederick County is very affordable, compared to metropolitan areas nearby, and given the fact that home values are on the rise, let’s establish that it is generally a good time to get into homeownership. The real questions you must answer are about your personal situation.

For some people, buying their home makes the most sense, and for others, renting is best. Here are six questions to help you determine if 2018 is the right time for YOU to buy:

Note:  Some of the answers might surprise you so read on…

💲1. Do you have savings?

Even though there are a number of zero down payment programs, you must plan for closing costs and many other one-time expenses as a homeowner. Insufficient savings may not prevent you from buying a home but it is a strong indication that you may not be prepared for the ongoing financial requirements of homeownership.

Rent VS Buying a Home - explaining housing affordabilityHow much should you have saved? It depends on what price range you are considering, as well as the loan you will be using. With an FHA financed loan, you will need to have 3.5% for a down payment. On a $325,000 home (average in Frederick) that is $11,375. You will have some other expenses, like the home inspection, typically $400 to $500. You may have some closing costs, like origination fees, and fees from the title company, typically 2% to 3% of the purchase price. Sometimes buyers can negotiate with the seller to pay closing costs, but its best to be prepared.

How much do you need for a downpayment on a home? For most first-time buyers, FHA loans are a great choice, with low-downpayment and common sense qualification criteria. But there are also conventional loans and VA loans to consider. The downpayments will vary with each loan and each lender.

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💳2. How much debt do you have?

A lender will calculate your debt-to-income ratio, which is different for each loan product. Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income.  A conservative number to shoot for is having a mortgage that is 28% of your income. This is called the front-end ratio. Most mortgages have a maximum back-end DTI ratio of 43%. The back-end ratio takes all your debt into account.

You can do a quick calculation and decide how you fare in the category of debt. To calculate your debt-to-income ratio, add up all your monthly debt payments and divide them by your gross monthly income. Your gross monthly income is the amount of money you have earned before your taxes and other deductions are taken out.

If you are thinking about a home purchase you’ll want to plan ahead to minimize your debt. You’ll want to consider foregoing a new car purchase. You’ll want to pay down your credit cards and pay off some debts.

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📊3. How is your credit score?

Your credit score is an important asset. Your lender will consider your score as an indication of your credit worthiness. Typically, the higher the score, the lower your interest rate. Additionally, your credit history is important. While you can always find a lender to lend you money, solid lenders are more skeptical if your credit history is not good.Credit Score

Minimum Scores. While FHA and Freddie and Fannie have minimum scores, (A minimum of 580 is necessary to make the minimum down payment of 3.5%.) many lenders have their own requirements. (FICO credit scores start at 300 and go up to 850.) Most lenders require a score of 620 to 640 to qualify. The higher your credit score, the lower risk you are. The lower risk you are, the lower your interest rate. Shoot for a high credit score, not a minimum score.

Related Article: How to Build A Credit Score Lenders will Love

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📈4. Is your employment situation steady?

While we can never predict the future, you probably have a sense of your job or business security. If you’re working for a start-up company, you probably want to wait for a secure situation. The last thing you want is to saddle up with a mortgage and then find yourself unemployed, or underemployed.

🕰5. Are you going to be around for a while?

Again, we can’t tell the future, but you’ll want to be sure that you can stay in your home for a minimum of five years. If you expect to get a job transfer within a few years, you may end up paying money in order to sell it. You’ll want to make sure your home value increases enough to cover the costs to sell your home.

The length of time that it will take to cover those costs depends on various economic factors in your area. Currently in Maryland we’re seeing an average of 3-5% appreciation per year. This is considered normal and healthy and will cover buying and selling costs in about five years. If the area you buy your home in experiences an economic up turn, the length of the time to cover these costs could be shortened, and in the unfortunate circumstance of an economic downturn, the opposite is also true.

How long will the home meet your needs? What features do you require in a home to satisfy your lifestyle now? Five years from now? Depending on how long you plan to stay in your home, you’ll want to make sure that the home has the amenities that you’ll need. For example, a two-bedroom home may be perfect for a young couple with no children. However, if they start a family, they could quickly outgrow the space. Therefore, they should consider a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you’ll need will help you find a home that will satisfy you for years to come.

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👷‍♂️6. Are you ready for the responsibility?

Rent VS Buying a Home - explaining housing affordabilityThere are costs and responsibilities with homeownership that most renters are not accustomed to, things the landlord took care of. Home insurance, home maintenance and repair, appliance replacement, and home maintenance and repairs are all important considerations. Most experts suggest you save 1% of your home’s value every year. Saving for long-term projects, like replacing the roof or the HVAC system, will save you the emergency of the cost of replacement when there is a sudden breakdown of a major system, or the inevitable replacement because of age.

Your home is probably the most expensive purchase you will make in your lifetime. It is a place to build your nest, both figuratively and literally…your financial nest egg. You will want to take care of the maintenance of your home regularly to maintain its best value throughout the years you own it.

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😀Is This the Right Time to Buy a Home in Central Maryland?

Once you have crunched all the numbers, considered your financials and future employment, the decision is really about lifestyle. For most Americans home ownership is the most likely method to build wealth. It is also the way to create a lifestyle that best suits you and your family. Those intrinsic desires are best accomplished in your home…paint the walls the way you want, plant a garden, get a swing set, and enjoy the freedom to build a nest, both financially and metaphorically. Rent vs buy – explaining housing affordability, we hope it helps with your plans!

If 2018 is your year, give us a call and we’ll help you find your nest.


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Chris Highland, Broker eXp Realty Maryland
Cell:  301-401-5119  Broker:  888-860-7369
Chris@ChrisHighland.com


How Much Do I Need for A Downpayment on a House?

How Much Do I Need for A Downpayment on a House?

🤥Myths Abound Concerning Down-Payment Requirements

There are several reasons why there are myths circulating about how much home buyers need to have saved for a downpayment on a home. Studies by NAR (National Association of Realtors®) show that half of Americans believe the misconception that you need to put 20% down on a house. This is just not the case.

It’s possible that since the housing collapse of 2008, the many discussions of solutions to, and prevention of another crisis have left consumers with misunderstandings. There has been a lot of talk by housing authorities about raising the required down-payment, but that hasn’t happened. The reasoning is, with more skin in the game, home owners will be much less likely to walk away from their mortgages.

While that is eminently true, raising the required down-payment to 15% to 20% would put so many people out of the market, it would be devastating to the housing market. That kind of money is just out of reach for the majority of Americans. [that opinion is mine]

As well as the discussions of how to solve and protect against another mortgage meltdown, there is another source of misinformation that we all love to watch… I call it HGTV-ism…it comes from watching too many TV real estate shows! I love to watch them, I admit, but they can sometimes lead many people to false conclusions. So…

💰How Much Do I Need for A Downpayment on a House?

real estate negotiating1. With an FHA guaranteed loan, the required down payment is 3.5%. FHA loans are often the choice of first-time buyers, because of the low down-payment and because the qualification process is based on more than just the credit score. Common sense underwriting will consider your payment history, as well other indicators of credit-worthiness. FHA also requires that the property meet certain minimum standards.

Fannie Mae recently announced 3% down payment mortgages to help first-time homebuyers who can’t afford a large down payment but would otherwise qualify for a mortgage.

“We know that access to credit remains tight for many borrowers, and we are working to address this issue in a responsible and thoughtful manner…To increase access for creditworthy but lower-wealth borrowers, FHFA is also working with the Enterprises to develop sensible and responsible guidelines for mortgages with loan-to-value ratios between 95 and 97 percent. Through these revised guidelines, we believe that the Enterprises will be able to responsibly serve a targeted segment of creditworthy borrowers with lower-down payment mortgages by taking into account “compensating factors.” ~ FHFA Director Mel Watt

2. With a VA Loan, as always, there is no down payment. VA LoansThis is truly a great way to say thank you to our veterans for serving us. But even with VA loans, there are myths that circulate. For instance, did you know that a VA loan can be used more than once? There is also no required mortgage insurance, even though the loan is for more than 80% of the value of the property.

Our friends at Inlanta Mortgage – Madison have written extensively about the requirements, value and benefits of a VA mortgage:

With both VA Loans and FHA guaranteed loans, the buyer must occupy the home as their primary residence. Both loan types make it possible for borrowers with less than perfect credit to get a loan. Emphasis is placed on the most recent 12 months of credit history. Even so, VA mortgages have the lowest rate of default among all mortgage types.

3. Conventional Financing is another option. A conventional loan, sometimes called a conforming loan, is not insured or guaranteed by the federal government. It adheres to the guidelines set by Fannie Mae and Freddie Mac.

A borrower can get a conventional mortgage for 20%, 15%, 10% down, and even for as little as 5% or 3% down, when combined with family gifts or other form of down payment assistance. Every state in the country has some type of down payment assistance program for qualifying buyers.

With a Conventional loan, naturally, the lower the down payment, the stricter the qualification requirements. With a conventional loan, you can often get a lower interest rate.

The 20% limit comes in to play because when a buyer puts down less than 20%, they must purchase private mortgage insurance. Once the mortgage gets paid down to more than 20%, the mortgage insurance drops off.

The differences between FHA and Conventional loans can be found in mortgage insurance regulations, qualification requirements and closing costs, as well as other items. Be sure to consult a lender for all the information about lending, loan products and standards today.

🤔Where Can I Get Money for A Downpayment on a House?

Many people who would like to be in the market to buy a new home are wondering where they will get the money for a downpayment.  Following one of the worst recessions in our history, the average American’s savings are at the lowest in 75 years. There are ways to get closing cost help which are allowable by FHA:

Gift Funds

FHA will allow for a homebuyer to receive the down payment as a “Gift” from a family member or non-profit organization.  There are county and state non-profit programs which you may qualify for.  If you are receiving a gift, you must provide the complete papertrail of the money, including the giver’s bank statement, to prove they had it to give.

Employer, Local and State Funds

There are several non-profit sources for closing cost help.  Many employers offer programs that match funds, city, county, and state employees have access to programs.  The Maryland Mortgage Program is one such program with generous limits and terms.

 Grant America Program is a government grant program that provides anyone who qualifies for an FHA loan with a down payment grant to be used towards the purchase of a home. The US Dept. of Housing and Urban Development has lists of programs that assist with downpayment costs.

401K Accounts

The IRS discourages people from withdrawing money from their retirement funds early by levying a 10% penalty. Except for a 401K account. An option with a 401k is to take out a loan. Your loan can be a minimum of $10,000, up to $50,000 or half the value of the account, whichever is less. If you must borrow against an account, you must be able to qualify with the monthly repayment amount. The interest rate will be a bit higher, but you’ll be paying yourself. There are pros and cons to borrowing from your 401K.

Seller Contributions

If you are buying a home with a conventional loan, then there are no laws keeping the seller from contributing to closing costs.  Different loan programs have different allowances, though, so you’ll want to shop around.  I read a statistic recently that said that the average consumer spends 15 hours in research when buying a car, and only 5 hours in research when shopping for a home loan.

For more information, talk to your lender about the types of assistance that may be allowable, and search for available programs on sites such as Down Payment Resource™.

In an environment that is constantly changing, having a trusted adviser in real estate and lending is more important than ever. Contact us for a lender referral. 301-401-5119

🏡Search for Homes in Central Maryland

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Chris Highland, Broker eXp Realty Maryland
Cell:  301-401-5119  Broker:  888-860-7369
Chris@ChrisHighland.com

The Home Buying Road Map – How to Buy A House

The Home Buying Road Map – How to Buy A House

The Home Buyer’s Road Map

Studies still show that the majority of Americans still see home ownership as part of the “American Dream”. In a 2017 Pew Research Center survey, 72% of renters said they would like to buy a house at some point. If buying a home is on your list of to-do’s, you probably know that preparation is in order. The home buying road map will help in explaining the process.

It’s a good time to buy a home. Here’s why:

  • Interest rates are at historical lows. Historically, the average mortgage rate is between 7% and 8% (since people have been keeping track…since c.1971) Rates have been bumping around the low-to-mid 4’s for several years. These rates drastically increase buying power.
  • Home prices have decreased (2006 – 2010), bottomed (2010 – 2014), and are rising since 2014. When values are rising, it’s a great time to buy.
  • There is a small, but good inventory of homes on the market to choose from. More homes come on the market every week.

Buying a home is one of the smartest purchases you can ever make. For generations, many Americans have used real estate as their first avenue of wealth building. Building your own equity over years is one of the smartest and most likely ways to gain wealth, and it’s a very real hedge against inflation.

Another reason is that home ownership has many positive tax implications. The three most important sources of tax savings for home owners are;

  • deductions for mortgage interest
  • deductions for real estate taxes
  • capital gain exclusion for the sale of a principal residence

The Home Buying Road Map

The process of buying a home is usually not a quick process. That’s why its important to have an experience Realtor® along for the journey. Here’s my interactive “Home Buying Road Map” to put the typical* home buying process in an understandable context. Each touch point is leads to more information on that topic.

Buying a home is not an event, it’s a process. Helping first time home buyers navigate the process is one of our favorite parts of selling real estate in central Maryland. While there are several moving parts to the process, from negotiations to appraisals and inspections, it is always a joy for us to help people enter into home ownership.

The Home Buying Process

10 Road Signs Along the Way:

  1. Consult a Realtor®. Use an experienced Buyer’s Agent to help along the way.
  2. Get Pre-Approved. Use a trusted LOCAL lender. Your buyer’s agent will have some recommendations.
  3. House Hunting with your buyers agent. Your agent will be invaluable in navigating your local market.
  4. Make an Offer. There are a lot of moving parts to crafting a strategy that will win.
  5. NegotiationsExperienced agents negotiate for a living. Put your agent to work for you.
  6. Formal Loan Application. Yes, that means paperwork. Make sure you are prompt with it.
  7. Inspections. and more negotiations.
  8. Appraisal.
  9. Walk-through. Go through the home up to 5 days before settlement to assure repairs were made and the home is in accordance with contract terms.
  10. Closing! Congratulations!

For most Americans, purchasing a home is their entry to building wealth. It is also the entry to a lifestyle and to stability for a family. We can’t think of anything we’d rather be doing. Contact us for a guided tour of the home buying process.

*Typical home buying journey is just that, not a guarantee.


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Chris Highland, Broker eXp Realty Maryland
Cell:  301-401-5119  Broker:  888-860-7369
Chris@ChrisHighland.com

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