Mortgage & Real Estate Planning with Ethan Van Eck

What Are You Paying For? Effective Marketing Methods For Selling a Home, Part I

Mortgage 1st Realty — Wed, 10 Jan 2007 11:37:57 -0800

Though the public opinion is that the real estate market has slowed down this past year, it is still a good time to sell. Statistically speaking, YES sales are down and in some areas home values have even dropped. However, this market change is a healthy one that will help our real estate economy in the long run.

The real estate boom that we all fell in love with was good while it lasted, but was simply not sustainable. Many investors and home owners bought beyond their financial capacity, banking on the short term gains from this rapid appreciation. Many are in serious trouble, and foreclosures are now increasing rapidly. Today it is more important than ever to market effectively and affordably.

Besides the fact that appreciation rates are predicted to do well this year, our current market is not "bad". True, it is slower than the past few years, but a little less than awesome is still very good, right? Think back to previous decades when interest rates were well over 10% and co-op brokering didn't exist...now that was a tough market to sell in! So, I'm asking you, the agent or owner, to re-frame your perspective on the market and possibly consider a new approach to marketing your real estate.

The key is to market a home effectively, not traditionally. When I consult with my prospective clients who are thinking of selling their home my first objective is to listen to their needs and second to formulate a customized & effective plan for marketing their home. I don't want to overcharge my clients for services that in my opinion are time consuming and not effective. I encourage every other professional to do the same; don't sell fluff, for your sake and your client's, run lean and mean...MARKET EFFECTIVELY.

In my experience, selling a home in any market is all about the "3 P's" of real estate, as I call them. They are, in order of importance:

1. PRICING

2. PROMOTION

3. PRESENTATION

For now let's just focus on the 1st "P", PRICING. The most common and easiest mistake that home owners make when they are trying to sell is inaccurate pricing. Not surprisingly, owners are most likely to overprice their real estate. The common attitude is, "We're in no major rush to sell, let's see how much we can get for our house." There is nothing wrong with this mind-set, however overpricing will actually cost you more than it profits.

The first 30 days that your home is listed are the most critical, and proper pricing is essential within this time frame. After 30 days your home will start to age on the market. Buyers are looking to pay fair market value or more on fresh new listings that are priced well; once a home has sat for a while, the mind set of the buyer changes.  They see that the home is not in high demand and they try to haggle the price down to get a good deal on the property. The longer a home sits on the market, the lower the offers get until the owner is in a position where they have to sell and are forced to take a lower offer.

Most buyers are familiar with the markets that they are shopping in; they have looked at other listings and know what they should get for their money. If your home is overpriced it will bring people into your home that are expecting more than it offers, and it will keep your target buyers from viewing it because it is out of their price range.  Ultimately this keeps your home on the market longer, and therefore makes it less desirable.

On the opposite side of the spectrum there are those who underprice their homes for a quick and painless sale.  There is a time and place for underpricing a home, but unless it is absolutely necessary it is not a good idea.  Underpricing not only hurts the seller's bottom line, it slows down the appreciation rates of neighboring homes. Pricing your home too low does often accomplish a speedier transaction, but it also means you walk away from the closing table with less than you should have settled for.  Furthermore, since the majority of residential appraisals are accomplished using the market comparison approach, the price that you sell your home for could show up on the appraisers report of a neighbor looking for the highest value they can get.

Pricing is a basic ingredient for selling anything, however, it is undoubtedly the most important element. As for techniques being used to get an accurate price, that is a different topic for another time.

I am willing to answer questions about pricing methods and share my method for valuing a home. Home Owners, let me know if you have questions about the value of your home. Professionals, feel free to add your thoughts or techniques to this message.

Next I will cover effective promotion of real estate, which is the real meat of a real estate agent's services.

Mortgage Banker or Broker? You decide

Mortgage 1st Realty — Fri, 05 Jan 2007 15:04:08 -0800

When I bought my first home I was not yet a mortgage loan originator, and I did not go shopping for mortgage rates. I went with a loan officer that I knew and trusted, which is what most people do. The loan officer I used for my purchase worked for a state-wide bank in Illinois, she did a great job and I referred my real estate clients to her. However, as time passed she grew more and more frustrated with her work environment and the limitations that her bank placed on her; she did not feel like she could compete in the aggressive marketplace. She eventually moved to Florida and became a loan officer for a mortgage broker. I called her shortly thereafter and she said that she loved working for a broker, she could offer her clients more options and savings.

Do you know the difference between a mortgage banker and a mortgage broker? Do you know the strengths and weaknesses of each? If not then read on...

The common perception of mortgage bankers is that they are reputable, yet rigid, and that of brokers is that they are shady, but flexible. There is some truth and fallacy in both of these opinions. The truth is that banks and brokers are governed by the same federal rules and regulations when it comes to the practice of mortgage lending. There are, however, different regulations and requirments for establishing and maintaing a business as a bank or mortgage brokerage. Since a brokerage most often does not fund their loans with their own money it is much easier to open a mortgage brokerage than to open a bank.

A mortgage brokerage is a business that brokers loan products from wholesale lenders, many of these lenders are the same banks consumers can go to directly to get a mortgage. If a consumer goes to a bank to get a mortgage they will be offered the banks loan products with retail interest rates. A broker contracts with multiple banks to distribute the same mortgage products except they are allowed to sell these loans at a wholesale rate. Does this mean that if you go to a broker you will get a better rate than at a bank? Not necessarily, whether you go to a bank or brokerage there are three factors that will impact the type of deal that you will get: 1. your qualifications, 2. the mortgage products being offered, and 3. the integrity of the loan officer/institution you are working with.

As a consumer it is difficult to know whether or not you are getting the best deal possible. The best advice I can give you is to make sure you trust your loan officer, and to make sure they are able to give you what you want. Let's consider the loan officer you are working with, does he or she work with a bank or a brokerage? A bank employee is going to be loyal to their employer first, as all good employees should, and to their client second. In other words, they have a specific product catalog they can work with, and if you qualify for one of their loans they are going to try and sell it to you. If there is another loan product that would better suite your situation at bank A, B, or C down the road they are not going to send you to their competition. However, a loan officer at a mortgage brokerage does not have a specific responsability to any one bank, they are only expected to do business within the terms of their contracts with each bank that they broker. Assuming they are a reputable brokerage they will have long standing relationships with multiple, reputable banks and lenders, and they can offer you many more options in loan products and interest rates. It's definately more convenient to shop at a brokerage, than to go from bank to bank on your own looking for products and rates.

Now before you jump on the mortgage broker train you do have to consider the other side of the coin. Since the requirments of opening a mortgage brokerage are less than that of a mortgage banker there are naturally more highly suspect mortgage brokers out there. Predatory lending has been a huge problem over the past decade. The complexity of our services and wide variety of mortgage products available has made it very easy to put borrowers into mortgage products that they should not be in. Like I said, it's hard for consumers to identify the quality of the deal that they are getting. State and Federal laws have made big steps towards regulating both mortgage brokering and banking, but consumers do still need to take caution. Unless you have a personal relationship with your loan officer and explicitly trust him or her you should take a couple precautious steps before closing your purchase or refinance.

STEP 1- Understand the costs and fees associated with your mortgage: Probably more than anything, this will help you identify the integrity of your loan officer and/or lending institution. After you complete your mortgage application you are required to receive a copy of specific disclosures and documents that you signed. One of these documents is the Good Faith Estimate, make sure you examine this document closely and ask for an explination on anything you do not understand. Many times a mortgage broker will be paid a commission from the lender that funds the mortgage, and on the Good Faith Estimate this would be listed as a Yeild Spread Premium (YSP). Mortgage brokers and banks can also get paid by charging the borrowers a loan origination fee or a mortgage broker's fee. There will be many other charges on this Good Faith Estimate that are completely out of the loan officers control, but pay attention to exactly how much the loan officer or brokerage is going to get paid. If there is a significant Yield Spread Premium and a loan origination fee I would advise you to either elect a lower interest rate which pays a smaller YSP or negotiate down the loan origination fee. If your mortgage originator is getting paid a fair amount from the lender funding the loan it is not necessary to charge the borrower a fee on top fo their commission.

STEP 2- Ask Questions: Unless you are an active practioner in the this industry there will be many documents and figures that will be very difficult for you to understand. Please, for your sake, ask your loan officer questions about your options, products, and the documents you will be signing, and expect to get answers. If you are not sure about what you are doing, wait until you are sure. If your loan officer hesitates to give you answers, does not return your calls, or gets put off by your questions it is a good indicator that there could be a problem.

None of this was intended to offend mortgage professionals, rather to offer advice to consumers. The majority of brokerages and banks are reputible businesses, it is the minority that takes advantage of their clients and makes life more difficult for everyone. Nevertheless, it is always better to be safe than sorry. If you have any questions or comments I would love to hear them and I'd be happy to give you my time and knowledge.

-Ethan Van Eck- Real Estate Broker & Mortgage Loan Officer

Big Company Vs. Little Company

Mortgage 1st Realty — Thu, 04 Jan 2007 16:29:11 -0800

We've all heard the old saying "It's not the size of the dog in the fight, but the size of the fight in the dog". I was wondering how this applies to a real estate brokerage. I started my career while in college as an intern for a broker in my home town. He worked for a major real estate franchise and I started out doing busy work for him...making copies, stuffing envelopes, etc. Soon thereafter I got my salespersons license, and was planning on activating my license with this broker's office. I was naive at the time and did not do much research on what the costs would be to work for this company prior to getting my license. Needless to say I was shocked to find out how much it was going to cost me to have my license held by this office. I decided not put my license with a big company since I was not sure if real estate was the career for me or not. I put my license with a much smaller local brokerage that did not cost me anything other than my commission split. I was given the freedom to work when I wanted, no floor time requirments, and I got hands on personal training from my broker. After several years passed I was confident that I could open my own brokerage and I did.

Since we opened we have experienced significant growth, and our clients could not be happier. The more I talk to outside agents I have found that many new agents feel that they will be more successful at a large office. At the same time I have found that many experienced and successful agents are either leaving their major companies to open their own private brokerages or work for brokers like myself. Why work for a large company that costs more, pays less, and is willing to hire just about anyone with a license? Companies like mine can offer the same marketing services to our clients, can afford to pay our agents more since we have less overhead, and can offer more personal attention and flexability to our agents. I always ask other agents, "Are your clients working with you because of the company name on your business card or because you did a good job selling yourself to them?"

I would love to hear your thoughts on why a bigger company is better or worse.