Purchasing real estate is one of the biggest decisions a person can make personally and financially.  During this time of economic hardship buying a home has become a very difficult task as the American dream of owning your own home has been crippled by the economic crisis. The biggest obstacle to buying a home is the task of financing it. Banks now a-days have become very strict on their lending policies and that has a negative affect on the real-estate market and those trying to get a loan.  Fortunately, the FHA is here to answer the call and that is what will be discussed here.
The government has established a program in which they insure a portion of the purchase of your new home and the cost of the work you want to do on the home you’re buying. The biggest advantage of this deal is you only need 3.5 % down and the rehab costs are lumped into the loan which allows you to pay over a 30 year period rather than coming out of pocket for that money.  This will save you time and money by allowing you to have only one loan. If you just had a conventional 30- year loan you would have to go out and get a Construction loan that has high interest rates and a short payment period. By using the 203-K loan program you can have the flexibility to improve your house, increase the house’s equity, and save money before you even move in. What can go wrong with that? This loan allows you to purchase a singe family home, a condominium unit, one to four family dwelling that has been completed for at least one year, and a mixed used residential property.
In summary, people are under the impression that you need 20% down and perfect credit to buy a home and that just isn’t the case.  Most people are unaware of how FHA loan products work and have never even heard of most of their programs- including the 203K loan.  Through education and the efforts of your Realtor and lender, you will find that many of the barriers to home ownership in today’s market can be removed.

Newman Realty

http://www.newmanrealtyillinois.com

Purchasing real estate is one of the biggest decisions a person can make personally and financially.  During this time of economic hardship buying a home has become a very difficult task as the American dream of owning your own home has been crippled by the economic crisis. The biggest obstacle to buying a home is the task of financing it. Banks now a-days have become very strict on their lending policies and that has a negative affect on the real-estate market and those trying to get a loan.  Fortunately, the FHA is here to answer the call and that is what will be discussed here.
The government has established a program in which they insure a portion of the purchase of your new home and the cost of the work you want to do on the home you’re buying. The biggest advantage of this deal is you only need 3.5 % down and the rehab costs are lumped into the loan which allows you to pay over a 30 year period rather than coming out of pocket for that money.  This will save you time and money by allowing you to have only one loan. If you just had a conventional 30- year loan you would have to go out and get a Construction loan that has high interest rates and a short payment period. By using the 203-K loan program you can have the flexibility to improve your house, increase the house’s equity, and save money before you even move in. What can go wrong with that? This loan allows you to purchase a singe family home, a condominium unit, one to four family dwelling that has been completed for at least one year, and a mixed used residential property.
In summary, people are under the impression that you need 20% down and perfect credit to buy a home and that just isn’t the case.  Most people are unaware of how FHA loan products work and have never even heard of most of their programs- including the 203K loan.  Through education and the efforts of your Realtor and lender, you will find that many of the barriers to home ownership in today’s market can be removed.

Newman Realty

http://www.newmanrealtyillinois.com

The next time you go to open your mouth to answer a client's question regarding where interest rates are headed- STOP.  Now, before you open it again consider this- if you advised them about it you represented yourself as an expert and are opening yourself up to lawsuits galore.

Consider the complications of the current market and all the factors that can effect interest rates.  Are you really qualified to answer that question taking everythign into consideration?  Do you really even understand it?

Of course this post is a call for all RE professionals to strive for no less than an advanced understanding of finance principlas both general and those specific to our field, but it is more.

In Chicago, we've gotten no where near the kick in the face that the coasts are experiencing.  We're looking for a bottom somewhere near mid-2009 and all signs are pointing upward right now.  Money is cheap, inventory is plentiful for even the pickiest buyer, great time to be buying a house right?  Absolutely!!

But I'm hearing a lot of agents tell people to continue to wait as prices will continue to come down and when I hear this I cringe.  Yes, I agree that getting the best price possible on a home is paramount but do not let that one single task pull you off course.  What most agents forget to mention, or more likely don't understand, is that with economic rebound comes a myriad of other changes- many of which are not advantagious to buyers.  For example, an economic leveling off and turn around will eventually cause inflation which will drive up the cost of money and thus interest rates.  While the average home price might drop an additional 2-3% by that time, the extra cost of your mortgage every month more than wipes out that perceived gain.

Now here is my plee with all you buyers out there to find a GREAT lender.  Not good, not talented, but GREAT!!!  Your lender should be more than just the person who gets you a loan.  it is important to forge a strong relationship with that person and go over multiple scenarios and rates that cover all possibilities.  They should have a strong understanding of economics and be up to the second on what is currently happening out there and how it effects you directly.

When you see a news article and a question pops up write it down and email it to them.  Go on-line and read up on the questions you should be asking, do something to cover your bases!

Too many people refused to take an active interest in their education regarding real estate and the finance industry that supports it.  Now, more than ever, it is imperative that everyone out there take the time to ask the questions we didn't ask before.  And if you're still not sure of the answer to your question, then ask it again and again until you actually feel comfortable with every step of the process and can form your own opinions on the situation.

Education is key here.  Your agent and lender should be working together in unison to provide you not only with data but also interpretation and analysis of the market and how you can maximize your position by using that knowledge to your advantage.

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Scott Newman
Newman Realty
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newmanrealtychicago@gmail.com

All of you RE pros out there who closely follow the economics of our business, put your money where your mouth is and sound off about where you practice and when the bottom will occur.

I'm Scott Newman, owner of Newman Realty.  I practice RE in Chicago and I think our market will bottom out sometime during the 2nd or 3rd quarter of next year.  I think the city will see a stagnation and then reversal of the depreciation we've been experiencing first with the suburbs to follow as soon as the media decides to accurately inform the public of the situation.

I'm adding a few, please keep it going with your additions:

1) Require a minimum of an associate's degree to practice real estate

2) Require specific education requirements for the specifc type of RE you practice (REO, residential, commercial, etc)

3) Require agents and brokers to take and pass specific college-level courses relating to finance, economics, and business

I think education is the key and those who don't make a commitment to bettering their knowledge and comfort level with all aspects of the business are hurting us all everyday they practice real estate.

What are your thoughts?

Scott Newman

www.newmanrealtyillinois.com

This was pointed out to me by a fellow agent lately and it was so simple and full of common sense I just had to share it:

The next time you think about listing your property for $149,999 or $199,900 or whatever version of this late-night infomercial trick you normally follow- DON'T, and here's why.

In this market more people are being conservative and looking at the bottom of their price range first to see if they can find something that will work for them for the least amount of money.  Let's say you're listing a home for $99,900.  If that person is looking at homes between $100,000-$120,000 your listing gets passed up when it very likely would have competed well with those other listings for the low 100's.  The same is true for the opposite.  If they're looking from $75,000 - $100,000 you still get included.  Another reason this makes sense is because Realtors are sales people and you have to respect that.  If they're told to search for 100-120 they'll likely bump that number up to 100-125 or 130 because they figure there's room for negotiation.  On the other hand, no Realtor is going to include $99,000 in that search so again you're missing out.

I used to always list properties for 900 or 999 at the end figuring it mentally was better than rounding up because of the second number but NEVER AGAIN!  There is no disadvantage to using the whole number and nothing to gain but exposure to people looking to stay at the bottom end of the range which you would fit into if you follow my advice!

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Ok so you’re on Google Ad-Words and now you’re looking to move beyond that into other pay-per-click advertising methods but you’ve overwhelmed by the choices and the range of pricing and options out there.  Sound like you?  Read on…

Here is a breakdown of the sites I think are worthwhile:

1) Facebook- $.30-$1 per click depending on where you're at.  Extremely helpful.  Make sure your ads building your brand are pay per impression because all your friends and anyone who knows you will click on it and cost you a fortune and the last thing you want to do is tell them to stop and discourage people from using your ads.  Target one ad to sellers, one to buyers, and one to a specialty like lenders, foreclosures, short sales, investors, etc.  You can pick the demographics of the people who see your ad and it will tell you how many people based on the criteria you select.  Play around with this and check your stats for best results.  This is crucial because your profile, group page, and friends all work together to reinforce what your ad is saying.

2) Zillow and Trulia.  These are flat fees but you can trick your clicks so you can figure out cost.  The impressions are helpful as you can really get detailed in terms of the use demographics (I can pick the Gold Coast neighborhood of Chicago for instance).  If you're participating- like you should- with their blogs, Q&A forums, and discussions you're also reinforcing your knowledge and brand several times through several methods just like Facebook.  Again, money very well spent.

3) Realtor.com- if you can afford it go with the side and top banner ad package on the site.  It's about $900 a month in Chicago as an example, but I see about 100-150 clicks each month from serious buyers and sellers who are active in the market and overwhelmingly ready to go in under 3 months.  About 1% close and it’s realistic to expect a 5-10 times return on your investment if you make those leads a top priority.

4) Local sites- if they're well made and popular enough this is a worthy choice too once the rest are in place.  Citysearch.com for example is something like 50 cents a click up to 200 clicks for the month and then the rest are free.  For $100 you're basically get unlimited clicks to your site or wherever else you want to send people.   Consider local sites that focus on something very specific like a neighborhood in a city or even a specific market of people you’re going after business from specifically (boat owners, first time buyers, retirement, etc).  Again, another very cost effective method of driving business to your site.  


Now a few tips I've found really help with pay-per-click ad effectiveness

1) Include a phone number or email with your ad along with the "click" that sends them to your site.  If possible emphasize that the number or email is a "quick response" type of thing, which appeals to a lot of people.  I actually ask for text messages in a lot of my ads because it lets me put my # out there but also allows them to contact me without actually having to make a call, which people respond to.

2) Be specific about the link you send them to.  If the ad is about foreclosures send them to a page on your site specifically addressing foreclosures.  People are lazy and if you just send them to your home page they will likely turn around and leave right away because it's not instantly what they wanted.

3) You have to make a call to action.  Even if you're just saying that you're a nice, helpful realtor/broker (pure brand awareness) you need to implore them to do something.  "Let me show you how I can help" or "Call me now to find out what good service is all about" or even “Call me to find out what the condo down the street from you sold for”.  Say something that gives them an incentive to click on your ad or contact you no matter what your message is.

4) Challenge them with something that requires an instantaneous response.  I have a lot of success with "text me the address of a property you're interest in and receive a response in 30 seconds or less".  This is a challenge people often take me up on.  What ends up happening here is the person sends me an address then I get back to them right away and they saw they were just testing me out but are amazed I actually got back to them so quickly.  Then they end up taking my info and recommending me to someone or asking to be added to my email list and we do business down the road.

5) Use ad-planning options wisely.  Pay attention to the demographics of who's seeing your ad.  The more customized the list to what you're selling the more likely they'll be quality clicks.  Remember 10 clicks is not 10 clicks.  You want quality.

6) Track your numbers closely or you're wasting your time and money.  You should know how many dollars on average you're spending to get one new client and what the ROI is at all times MINIMUM.  This is how you tweak your ads for maximum efficiency!
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The advice given is meant to be candid and takes into account that not all agents are as honest as they should be.  I am in no way condoning illegal or un-ethical behavior but, as in every industry, you have to know how to get things done and that is the idea behind this post.

1) Get pre-approved through the bank that owns the property
 
    Everything thinks cash is king and in many cases it is, but I've seen banks pass up cash buyers for those with who need financing and are offering a couple thousand less simply because they were willing to use their mortgage company.  Think about how much of your money goes towards interest in the beginning of your loan and about how much you pay if you let it full amortize.  The bank is likely taking a huge loss on the home you're about to buy and this is an easy way for them to recoup some- if not all- of that money.  If you're working with an agent have him find out which banks owns the property and then jump online and get a quick pre-approval from that bank before submitting your offer.  Make it clearly known in writing that you're 100% committed to using their lender and you might just beat out those cash investors after all.

2) Don't be afraid to demand proof that the rules are being followed

    I would highly recommend that if you're working with an agent who doesn't have a strong working relationship with the listing agent- and especially if you're not using an agent- that you request everything in writing.  This includes proof of submission of your offer (with time and date), rejections, counters, and any correspondence you have with the listing side.  Many buyers agents are afraid to "rock the boat" but the simple truth is if the agent was planning on not following the rules this will force him to and if he was then he'll respect you for looking out for your client's best interests.  Negotiations and transactions involving REOs can be long and drawn out so if you have written evidence of where you came from and where you're going you'll always be prepared with accurate information.  Everyone should play by the same set of rules!!

3) Use a buyer's agent that has proven REO experience

    Notice I didn't say "specializes in REOs".  This could just mean your agent took a 2 hour class on foreclosures and is now trying to profit off the misery of others.  Spend the time to seek out and research the top REO buyers agents in the areas you're looking.  Along this same vein, be prepared- or even offer- to sign a buyer's agency agreement.  If you want them to make the commitment to help you then make the commitment to use their services.  If their reputation precedes them and you've sought them out specifically you really aren't taking a risk by agreeing to use their services exclusively.  REOs are public knowledge so there is no special list one agent gets that another doesn't.  You're hiring them for their expertise, contacts, and reputation.  The last thing you want is a listing agent to get your offer and see the name of the buyer's agent everyone hates working with.  Find a great agent and stick with them.

4) Be patient

    In some areas there are more foreclosures than regular homes for sale.  Be prepared to lose a house or 2, or 5, before you get one for the price you're looking to pay.  This is a numbers game and the more bids you put in the more likely or one of your offers being accepted.  Also keep in mind the banks move at a glacial pace.  5+ days to respond to an offer is not uncommon.  I have seen agents and buyers get frustrated and pull an offer after waiting 72 hours and the bank was actually seriously considering accepting it.  You're not dealing with a person; you're dealing with a large corporation that has mountains of red tape to clear up before an answer can be given.

5) Be Prepared

    NEVER go into a negotiation without a plan.  Before you even pick up the pen to start signing the contract you should have a bottom line price firmly established, an idea of how the negotiation might go, and all the other information you have.  You should also have had the home inspected prior to making an offer on a REO because it is unlikely the bank will give you any credits if you find problems during an inspection after your offer is accepted.  Additionally, plan ahead for the worst-case scenario.  As an example my clients allot no less than $10,000 in their budget for unseen problems that crop up once you've closed.  No inspector can find every problem and when a home sits vacant for so long as foreclosures do small little problems quickly turn into major issues and a lot of those issues aren't easily discovered during a single 2 hour basic inspection.

6) Be Unemotional

    This goes along with #5 but warrants repeating.  If you decided ahead of time that your bottom line was $100,000 and the bank tell you $105,000 stand your ground.  You took the time to put all that thought into your numbers so why go back on them now?  Don't let the banks scare tactics get into your head and make you do something that doesn't make sense.  If the numbers didn't justify more than $100,000 when you ran them then why would they now?  Losing a property over a small amount can be tough but not as tough as when you're sitting on the couch in 6 months kicking yourself for overpaying by 5%.

7) Do your homework

    Even if you're working with the best agent who ever lived you still need to know the basics to be able to move quickly enough to snatch up the best deals as soon as they hit the market.  Use websites like Trulia, Zillow, and Realtor.com, to educate yourself on local market trends, price/sq ft info, and other data that will allow you to quickly make decisions.  Many buyers come up with a formula for arriving at their opening and max bids.  The more you know the more you can narrow down what you're looking for.  This maximizes efficiency for both you and your agent.  For example you may be looking at certain neighborhoods at first but when you really consider rehab costs you might realize that a house over 2,000 sq ft will cost more than you want to spend on rehab work.  Working out these things up front lets your agent focus in like a laser on the exact properties that meet all your needs right from the start.  Lastly, the more information you have the more comfortable you are with the whole process.  You're looking for total transparency between you and your agent and only knowledge will help you accomplish this.

8) Get to know the big players in your area

    Personal relationships go a long way in the business world and here is no exception.  Think about attending local REO networking events and getting to know the movers and shakers.  If people get to know you as a dedicated, knowledgeable, serious buyer they will look forward to seeing your name on the back of the offer they've just received.  This goes along with your agent's reputation as previously mentioned.  Having a solid reputation as a buying team will certainly help if you and one other buyer have identical offers and the asset manager asks the listing agent, "which contract would you accept?".

9) Understand the financial aspects

    There were so many flippers out there who produced beautiful rehabs that added real value to the communities but they were blindsided by loan terms they weren't even aware of including 20% early payment fees, balloon payments, or worse.  Knowing how to rehab a kitchen for $50,000 on a $30,000 budget is a great skill but if you don't understand the basics of lending and the financing of real estate you're just asking to be taken advantage of.  Buy a few books and familiarize yourself with the terms and basic concepts of lending.  This goes back to #2 as well.  If your bank told you 5.2% get that in writing along with all other correspondence.  If you seem educated and knowledgeable you will discourage a lot of people who might have otherwise tried to take advantage.  Take the time to understand a crucial aspect of the business and you'll increase your comfort level and minimize your risk even further.

10) Be a long-term thinker

    Too many people thought only 6 months ahead when buying foreclosures over the past 5 or so years and that's where a lot of the problems originated.  Examine historical trends in the area not just data from the last year.  Get a good feel for where the area had been, where it is, and where it's going.  If you're buying the home to live in then don't just purchase because it's the cheapest deal you could find.  Hold off for a home in the right neighborhood that is going to do well over time and be a place you actually enjoy living.  If you're purchasing with the intent of reselling then understand you might not get top dollar the day you finish fixing it up.  You might have to rent it out for a year or maybe 3 so plan for the long term.  This idea really encompasses a lot of the ideas already brought up.  If you think there's even a 5% chance it won't sell in a reasonable time make sure you consider what you'll do and if you can still afford to hold the property.  How is he rental market there?  How will you find a qualified renter?  You have to think down the road.

If you have any questions or comments please visit www.newmanrealtyillinois.com or email newmanrealtychicago@gmail.com

Scott Newman
Realtor
773-474-7011

I have worked in many different areas of Chicago in many different capacities- rekeying foreclosures, typing up BPO's, all the way up to running my own brokerage- so I know the view I have is a unique one.

I have also visited, and know well, many part of the country most effected by the current market and Chicago just seems to have a certain insulation that every other major city is just not experiencing.

It seems to me that if anything the desirable expanded downtown area is at worst stagnating.  One bedrooms and studios are still selling in the Gold Coast in 30-45 days, and the recently fringe areas of Bucktown and Wicker Park have now exploded into some of the most desirable areas of the city if not the entire country.

While a lot of these areas have micro-markets that are suffering- for instance those in the near west side who payed $1.4mm for a single-family they're not struggling to command $1mm for, or the 2 bedrooms/2 bath shoe boxes they used to sell like crack in River North for well 0ver $400K- we're just seeing a lot of people content to wait it out, rent, or in general, just continue to go about their daily lives without letting the doom and gloom prominent on the news 24 hours a day get to them.

The only obvious effect of the RE crisis effecting much of the nation is in the studios and 1 bedrooms downtown.  While those in good shape in desirable buildings- the vast majority to the tune of 90%- still are selling well with modest appreciations, there is an abundance of short sales and foreclosures happening on those who blindly overpaid for outdated buildings full of units with horrible floor plans and no where near the average finish level for the price range.  It seems, as is usually the case, the young and inexperienced buyers who make up the majority ownership for these types of properties outside of investors, were prayed upon by unscrupulous agents who shoved them into homes they couldn't afford for prices they shouldn't have paid.

Fear not though, because this is the exception and not the rule in Chicago's current market.  The South Side received a much needed shot in the arm with the spotlight thrust on the city by Obama's recent presidential win, and will continue to ride high upon the hopes that the Olympics will come bringing rejuvenation to many areas overrun with distressed homes badly in need of new life.  Obama's win really gave a boost to the whole city's RE market, with agents feeling renenergized with a new sense of enthusiasm by the exposure and recommitting ourselves to getting us through this latest inevitable downturn in the market.

In general, Chicago is doing just fine.  It just seems like the city has picked itself up by it's bootstraps and dug in it's heels for a fight we know we can win.  While CA, AZ, and FL are getting wiped off the map financially, Chicago is, at worst, doing a little worse than usual, which in this market just isn't that bad!

For more information visit my website at NEWMAN REALTY or email me at newmanrealtychicago@gmail.com.

Thanks,

Scott Newman