When A Billionaire Says That Real Estate Is The Best Investment Possible, LISTEN!!

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Who is John Paulson?

Paulson is the person who, back in 2005 & 2006, made a fortune betting that the subprime mortgage mess would cause the real estate market to collapse. He understands how the housing market works and knows when to buy and when to sell. What do others think of Paulson?

According to Forbes, John Paulson is:

“A multibillionaire hedge fund operator and the investment genius.”

According to the Wall Street Journal, Paulson is:

“A hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.”

Why does he believe homeownership is such a great investment?

Paulson breaks down the math of homeownership as an investment:

“Today financing costs are extraordinarily low. You can get a 30-year mortgage somewhere around 4.5 percent. And if you put down, let’s say, 10 percent and the house are up 5 percent, which is the latest data, and then you would be up 50 percent on your investment.”

How many are seeing a 50% return on a cash investment right now?

Paulson goes on to compare the long term financial benefits of owning verses renting:

“And you’ve locked in the cost over the next 30 years. And today the cost of owning is somewhat less than the cost of renting. And if you rent, the rent goes up every year. But if you buy a 30-year mortgage, the cost is fixed.”

Bottom Line

Whenever a billionaire gives investment advice, people usually clamor to hear it. This billionaire gave simple advice – “If you don’t yet live in your own home, go buy one.”

 

What Is Holding Back The Housing Market?

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Though the housing market is recovering nicely, it is not doing quite as well as some analysts had predicted. There has been no shortage of excuses offered as to why this is: the rise in interest rates, more stringent lending standards, the weather.

However, we feel that there is one factor that is most responsible for curtailing the number of houses sold – the number of houses available for sale!

Inventory Levels are BELOW Historic Norms

In a recent economic forecast, Freddie Mac addressed this exact issue:

“Including newly built homes in the inventory count, the total number of homes offered for sale relative to the number of households in the U.S. has been running at the lowest level in more than 30 years, as shown in the second exhibit. The relatively low for-sale inventory reflects several features of today’s market.”

“A supply-constrained market (holding other factors constant) will result in a decline in the volume of sales and an increase in real transaction prices.”

NAR Report Confirms Inventory Constriction

History shows us that a balanced real estate market requires a six month supply of available housing inventory. The National Association of Realtors released their Existing Homes Sales Report earlier this week. The report revealed that we are still only at a 5.5 month supply of homes for sale. We have not reached the 6 month mark in over two years.

The recent increase in buyers now looking will again put a strain on this number. That is why today at 2PM EST, we are hosting a special webinar for real estate professionals; The 4 Keys to Prospecting for Listings that Sell. Agents can reserve their seat here.

Bottom Line

While inventory levels remain below historic norms, it will remain a seller’s market. This being the case, if you are considering selling your home, now may be the time to list it for sale.

 

The Rules Of Home Buying Revisited.

In my years of experience as a mortgage professional I have just about seen it all. There are so many mistakes you can make when preparing for that new home purchase, and these are so easily preventable. I’ve written before about the Top Ten No’s of Home Buying, however, it is so HIGHLY important that I feel that a refresher course is good right about now. Here are some highlights:

1) Don’t go looking for a home before you apply for a mortgage. Discuss your goals and align your financing to match. I will always want a pre-qualification letter anyway. Why look at something that you can’t qualify for?

2) Don’t settle for a pre-qualification letter. It is written by the loan officer, and based upon information you may have only provided but not documented. It is better to get PRE-APPROVED. The loan will have been reviewed by an underwriter and can be approved subject to property and appraisal conditions. Highly important also when and if you get into a multiple offer situation!

3) Don’t pay off collection accounts just before you apply. Have your credit pulled and reviewed by a mortgage expert. By paying off any old collection accounts, you will have inadvertently made the collection appear as a current event and make your score worse.

4) Don’t tell your loan officer an untruth. Not only can you put yourself in legal trouble, but the loan originator could be hung out to dry. Honesty is always the best policy, and invariably, won’t fly. We have solutions to most problems.

5) Don’t close at the end of the month. It seems like every Real Estate contract is written to close at the end of the month, for no good reason. It is actually the worst time to close. The closing department of the lender, the title company closing the loan, and the banks funding the transaction are all over burdened with volume. I recently had a closing delayed due to the lenders being ‘overwhelmed’ at the end of the month.

6) Lock your rate for a long period and stop looking at the market. The times are changing and market rates can change dramatically, but not usually to the extent that will jeopardize your approval. Just in case… lock it!

7) Don’t change your finances while you apply for a mortgage. Home buyers get the itch to buy things in which to fill up their upcoming new home. Adding additional debt like a car or even a washer/dryer set or refrigerator can ruin your chances at a dream home, believe me! Have a plan and stick to it. P.S. Cosigning for your kids’ car has caused more problems for credit than I can count. Clunker’s build character.

Contact me for help in navigating this market that we are in, (214) 609-7123 or email at jtrump@kw.com

 

 

Tips For Home Buyers In A Hot Sellers Market!

The increase in housing demand has created a Sellers’ Market; this being the case, it is extremely important that buyers are prepared when they decide to buy in 2014! In order to compete in a seller’s market, buyers need to have their ducks in a row and look as strong as possible to a potential seller. Buyers—Be Ready!

The following are some great tips for being ready to move when the right property becomes available:

  1. Get Prequalified – Choose a lender so you know how much you can afford to buy. Complete a loan application so the lender has all of your pertinent information. Consider all loan options available; FHA, VA and Conventional. Discuss the pros and cons of how much of a down payment you will need with your lender so that you are educated going into the buying transaction.
  2. Review Your Credit Score – Have a mortgage lender check your credit and discuss your credit score with you. Often an increase in credit score by 10 points can make a huge difference in your interest rates. Discuss possibilities to increase your credit score with your lender. Some increases can be accomplished in 72 hours.
  3. Get Documents in Order– Locate your previous years’ W-2s and tax returns. Start saving paystubs and bank statements.
  4. Review Bank Statements for Large Deposits – Lenders will require any large deposits that aren’t income-related to be documented with a paper trail. Sold a car recently? Received a gift from a family member? Make sure that you have the necessary documentation to support any large deposits.
  5. Find a Great Real Estate Agent– Not all agents are created equally, so it is important to find an agent that you feel comfortable working with! Call me at (214) 609-7123 so that we can set up a no obligation consultation. That way, we get to know each other and make sure that we will be on the same page.

HAPPY HOUSE HUNTING!!

 

Thinking Of A Career Change? Real Estate Is The Way To Go.

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Becoming a real estate agent was one of the best decisions I ever made. Real estate has provided me with a great income, a flexible schedule and incredible investment opportunities, and there are many ways to make money as a real estate agent, or a Realtor, but it can be difficult to become an agent. Here is a great article on how much money real estate agents can make.

How hard is it to get your Real Estate license?

If you are thinking of getting your real estate license, you want to consider how hard it is to get your license. Texas is one of the more difficult states to get your license in; I have had my license for over 4 years and while it was not incredibly difficult for me to get my license, things have become even more difficult over the last few years as licensing requirements have changed in the number of hours of education required.

How long does it take to get your Real Estate license?

In Texas you must take 210 hours of Real Estate education before you can take the Texas real estate exam. That is over five weeks of classes if you went to school full-time for 40 hours a week! Most people don’t have the time to devote 40 hours a week to real estate school, and neither did I. It took me 3 months to take the classes and pass my real estate licensing test because had a full-time job and was forced to take classes after work and on the weekends. In Texas you need 210 hours of education, while in California just three courses are needed.

What do you have to do to become a real estate agent?

There is more to getting your real estate license than taking classes and passing a test. Real Estate is a highly regulated industry and here are some of the other requirements in Texas.

  • You must pass a background test, which involves being fingerprinted.
  • You must pass tests and quizzes to go along with the 210 hours of education you take. The education required for a Texas real estate license is not a walk through the park.
  • You must hang your license with a broker once you pass the exam and the background check to activate your license. Each brokerage has different costs; some take part of your commissions and some charge base fees.
  • You must buy E and O insurance and most likely will want to become a Realtor, join a local board and join local multiple listing service (MLS). It is not cheap to become an agent.
  • Once you have your license (in Texas) you must take 60 hours of continuing education (SAE) within the first 12 months of licensure, and 15 hours every two years thereafter in order to keep your real estate license active.

How hard are real estate classes?

You can take the real estate courses online or in person in a school. I took the classes on weekends because I learn better in a classroom environment. In my experience, taking real estate classes online is extremely boring since staring at a computer for 210 hours is not easy to do. I would take the classes in person if it fits your lifestyle, online is good for flexibility of hours, but that’s about it. The material is pretty dry, so it’s exhausting reading that much on a computer screen for that long, plus you get the input of an instructor that has “Been There, Done That.”

The material that is covered in the classes is very dry. If you are hoping to learn how to invest in real estate or learn advanced techniques in selling homes, think again! The material is about technical laws, rules, settlement sheets and case history. Very little is covered on material that will help people sell houses or help you personally invest in real estate. The material is meant to keep people from going to jail for committing fraud or misleading buyers and sellers, not to actually help you succeed.

For more information on how to become a great real estate agent, my suggested reading is: Gary Keller’s Millionaire Real Estate Agent.

How hard is the Texas real estate test?

The Texas real estate test is not easy! I passed it the first time myself even though I thought I would breeze through it easier than what I did. Many of the questions on the Texas test are very tricky with double negatives and wording meant to trick the test takers. There is also a ton of memorization needed and you need to be able to do math for the settlement sheets! The test itself takes up to four hours, is conducted in a high security test center and you aren’t allowed to bring notes.

How much does it cost to get your Real Estate license?

In Texas, the real estate courses vary widely in cost. Some online schools cost as little as a few hundred dollars, while classroom school courses can run into the thousands. I personally attended Champions School of Real Estate in Coppell (which has since closed its doors).  The exam itself costs $65 and you must also pay an accredited company or a law enforcement office to fingerprint you. Once you get your license you will have continued costs like board dues, MLS dues, operating expenses and fees or commission splits to pay your broker.

Conclusion

If you want to become a real estate agent, make sure you research what is involved in your state. Some states have easier requirements than others, but it is difficult to get your license in most places. It costs a lot of money to become a real estate agent, but it is well worth it in my opinion. Becoming a real estate agent allowed me a better opportunity to get involved with my daughters’ extracurricular activities and spend more time with her overall. I consider this the main bonus on top of the incredible income you can earn from real estate.

Contact me with any questions about becoming an agent, (214) 609-7123, or jtrump@kw.com

 

Waiting Periods for Prior Short Sales

For Conventional Loans, the guidelines are changing August 16th for Short Sale waiting periods. Currently the guidelines require a 7 year waiting period if putting less than 10% down, 4 years if putting 10% down, and 2 years if putting 20% down. They are changing to the following:

Changes to Seasoning Requirements for Deed-in-lieu of Foreclosure and Preforeclosure Sales: The waiting period requirements for borrowers who have had a previous deed-in-lieu of foreclosure or preforeclosure sale will be updated to require a four-year waiting period; though a two-year waiting period will be permitted if the event was due to extenuating circumstances** and the loan complies with all requirements specific to a deed-in-lieu of foreclosure or a preforeclosure sale due to extenuating circumstances**, as defined by Fannie Mae (see explanation below).

**Extenuating Circumstances: Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

When a borrower claims that derogatory information is the result of extenuating circumstances, we will ask that the borrower provide a detailed letter explaining the events that occurred along with any supporting documentation available to substantiate the borrower’s claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.).

The lender’s underwriter is responsible for determining that the borrower had no reasonable options other than to default on their financial obligations in order to allow for the lesser seasoning requirements based on the borrower’s explanation and supporting documentation.

In order to navigate through this complicated process, you’ll need a trusted lender, and I have been in the trenches with several that can help you. Contact me at (214) 609-7123, or jtrump@kw.com

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“We’ll Just Wait!” Is It Really Worth It?

New reports are revealing that the number of months’ inventory of existing homes available for sale is increasing. Some of these sellers are moving up, some are downsizing and others are making a lateral move.

There is no way for us to predict the future but we can look at what happened over the last year. Let’s look at buyers that considered moving up last year but decided to wait instead.

Assume, last year, they had a home worth $300,000 and were looking at a home for $450,000 (putting 10% down they would get a mortgage of $405,000). By waiting, their house appreciated by approximately 10% over the last year (national average based on the Case Shiller Pricing Index). Their home would now be worth $330,000. But, the $450,000 home would now be worth $495,000 (requiring a mortgage of $420,000 assuming the original $45,000 down plus the additional $30,000 from the sale of their home).

Here is a table showing what the difference in monthly cost (principal and interest) would be if a purchaser had waited:

Cost of Waiting: Was it Worth It? | Keeping Current Matters

3 dollars and 27 cents. Was it worth waiting a year to move up to the home of your dreams? Only you can answer that question.

Moving Up?

If your family plans on moving up in the next twelve months, it may make sense to move now rather than later. Prices are definitely still appreciating and, unlike the last year, interest rates are also projected to increase.

Contact Jim Trump @ 214-609-7123/jtrump@kw.com