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25 Comments on Selling Real Estate in a Hyper Inflation Market
Tim - I agree!
Vickie - What you are experiencing right now is pre-hyper inflation calm. When the wave crashes, I'm afraid what you have described won't be around anymore!
Bob, I, too have been wondering where we are headed. For 25 years, I have been ahead of the pack and placed myself strategically to be where the future is. Only 2 yrs ago I entered into real estate. I'll be darned if I have any idea where this industry is going. The only thing I can say that I am proactive about with any certainty is getting technology savy.
Bob, your concerns are noted. We were selling real estate in the 70s and 80s and guess what we were still making a good living. Real estate changes almost as quickly as the weather. The agents who adapts to the market are the agents that stay around regardless of the market. People always have a need to buy and sell real estate. We just need to help them do that.
About the time you think you have the business figured out it changes. Then you think you will never sell another house again. And guess what as long as you stay with it, it all works out. What you can't do is stop working at it.
Bob, you should definitely get out of the business before this wave crashes - you can send me your referrals! LOL
Bob, with hyperinflation, you need to be out of cash and have a stockpile of real stuff to live on and trade with. Maybe a year's worth of food supplies and other necessities that you can trade with. Then you have to be prepared to protect your stuff which means you need some guns and ammunition.
Real hyperinflation is scary stuff when you think about it. What if tomorrow there was a bank holiday and when the banks reopened they had a new currency. Maybe one new dollar would cost you 10 old dollars. Your whole life savings could be wiped out very quickly and there wouldn't be much you could do.
With hyperinflation the trick is to be into real assets that will hold their value and increase relative to federal reserve notes. This might be silver and gold. Silver might go from $15/ounce to $500/ounce. Then you can sell your gold and silver and pay off your mortgage.
I hate thinking about it but a prudent person prepares for the worst and hope it never comes.
Bob- I first got my licensed in those Jimmy Carter days. But we had some advantages that have since been stripped away from us by lenders.
We did a lot of wrap around mortgages. Well, lenders did not like that so after those days, they passed legislation that created the due on sale clause. We did not have the due on sale clause in those days.
We did a lot of assumable VA loans and FHA loans, and a lot of second seller financing. Those are not going on today the way they were then and they have placed safeguards in assumable loans, now it is assuming with qualifying. Katerina
Larry and Peggy - Great pointers! Thank you so much!
An - Right where I'm at!
Maria - Thanks, but why don't you go ahead and I'll take YOUR referrals!
Tim - I think I should go buy some silver maybe??? Good points!
Great post! I have a question for Katerina....when you say "wrap around" and then "due on sale" it sounds like many of these mortgages could be assumed by the new buyer???? That's gone now....for sure. How much did that contribute to the ability to sell homes during that time? Just asking.
Ruthmarie - good questions...I was wondering the same thing!
I really wonder about that whole "printing money" thing myself...where and HOW will it end...well, I guess it will never end, but level out at least?
I have had this same thought. I heard from other agents that the high interest rate market is really tough. There will be a lot fewer agents when the next wave comes. Will be interesting to see what will happen.
Bob it is interesting you bring this topic up. Some project out hyperinflation about two years out. If it happens seller financing will be in vogue again I am sure.
Bob, it is coming it has too.
We bought our first home on a land contract for 11% adn were thrilled to get it as rates were 18% in 1981.
This is one reason I think it is prudent for buyers to purchase with VA or FHA assumable mortages those will be golden again.
A standard conventional will not be assumable in the year to come.
Bob - Interesting question. Throw in the alt-A resets and the fragile hosuing market is going to have to take a few more punches before it recovers. My theory on preparation is to invest in things people will need such as housing. Foreclosures, short sales, inflation, and fear create renters. If you have homes for them, you have income-potential.
There are two things that are going to be different than what people have become used to...
Real estate will be desireable because it will ride the inflation wave. As the rate rises, property will, too.
Old debt (this low rate stuff) will look real attractive. Having a $300,000 loan at 6% won't look that bad if a car costs $200,000 and comes with a 20% loan.
How long will it be before the pitchforks come out.
Hi Bob!
I have a real nice soft patch of sand that I plan on sticking my head in! ;o)
Bob - assuming a loan and a wrap means that the original loan the seller has in place is assumed, and a second "wraparound" loan is taken out to compensate the seller for the increase in equity. The two loans together finance the transaction.
I personally think we will be okay because a plethora of the FHA loans being written today are assumable and in 3-7 years when the inflation hits, those loans will have great value in the marketplace.
Hi Bob -- I agree with many other comments on the value of FHA and VA, I just had a buyer reach a deal using FHA that couldn't have been reached otherwise.
I too have concerns and not a lot of answers. I watched what the early 80's did as my mother was in mortgages even back then. It wasn't pretty.
HyperInflation won't hurt renters like some of you believe...
If a large property management company tries to raise the rent on all their apartment units.. and the renters band together and all refuse to pay more rent.. You would have a stand off across the nation.. there wouldn't be enough police officers to evict every renter squatting in their apartments. I personally know if my management company tried to raise my rent more than 5% a year I would refuse to pay a penny more... I'd keep paying my rent.. but not the hyper-inflated prices they would ask... So in realty, hyper-inflation wouldn't effect renters anymore than homeowners. Renters of the world unite!