Why a Bank Statement Loan Could be the Answer to Your Prayers

Not common but a less known type of financing is the bank statement loan. What are they? I got this question from a small business owner recently who was trying to purchase a home. They are essentially a type of loan that allows a buyer to get a mortgage without the traditional documents (taxes, paystubs, etc.) that most loans need in order to prove your income.  They are also sometimes known as “self-employed mortgages” or “alternative documentation loans.”  I’ve had a lot of experience with recently minted small business owners and 1099 (independent contractor) who become frustrated that traditional lenders won’t lend to them due to a lack of “track record”. 

Let’s look at the different types of borrowers who could benefit from this type of loan.

Self-employed: These are the most common borrower for this type of program because they are able to prove that they make an income without having to use paystubs as verification. It may seem like tax returns are the next obvious form of verification, but sometimes things aren’t as they appear because self-employed people have a net income they actually make as well as a net income they claim.  This type of program allows the borrower to provide 12 months of bank statements to show the regular receipt of income.  A lender will still need to see expenses, but they will no longer penalize the borrower for what is written off a tax return.

Seasonal workers: This country has many of them and usually means they spend a single season making their entire year’s income.  Traditionally, a lender would take what the borrower made in a season and annualize it to see how much they have made in a year.  This makes the monthly gross income smaller, therefore making it nearly impossible to qualify for a loan. The bank statement loan would still annualize the income, but you can also use any other income you bring in on a regular basis as shown on your bank statements.  You must hold a seasonal job for at least two years in order to use the income.

Commissioned Employees and Salespeople:  Commission is not a regular receipt of income, some months you make more, some months you make less.  Similar to the seasonal worker, your total income will be annualized by a traditional lender, and your many write-offs will greatly decrease the total amount of income you can use to qualify for a loan.  When using a bank statement to prove income, the lender generally will deduct far fewer expenses, giving you a better chance of approval.

If you have decided that bank statement loans are the best option for you, you should apply with several lenders and compare. Many people believe that bank statement loans are going to offer worse terms than a traditional loan, but that is not always the case.  Each loan has its own advantages and every lender and loan are different, so it’s in your best interest to work with a professional to explore the best options for your circumstances. Of course, I have lenders who can advise on these types of loans and get you into the best lending situation. 

2022 Market Predictions: Is a crash coming next?

The biggest market question hovering in the air right now, no matter where you live, is how is the housing market doing and will it crash in 2022?  The simple answer is that it will not crash this year. There I said it. I don’t like making absolute statements like that, but the forecast for the next 12 to 14 months clearly shows that most likely the housing market is expected to stay robust.  Last year, homeowners found themselves in a market where their houses sold extremely quickly and often for above the asking price.  Supply and demand at its finest, most buyers ended up in bidding wars, and often times buyers would be making offers on several properties before finding themselves the winner of said bidding war.

Note: One caveat is if there is something external to the housing market which causes a DEEP recession, but even then, the demand might overcome this event. 

We are coming off a year in which the price of homes in the United States increased by an incredible 18.8%.  And the market is actually even tighter now than it was before the spring 2021 housing frenzy.  Even Zillow has predicted that the year-over-year rate of home price growth will hit 22%!  That’s historically unprecedented!  By this time next year, the typical U.S. home is expected to be worth almost $400,000.  This outlook prediction is driven by Zillow’s expectation that the current market conditions will persist, with demand for houses far exceeding the supply of available homes.

Most experts agree that housing demand will stay strong throughout 2022.  Spring and summer will likely see an increase in listings, but it is unlikely that there will be enough inventory to meet the demand.  This shortage of listings has created the current trend of houses sometimes selling within hours of being listed.  In fact, the average amount of time that a house is currently on the market is less than 15 days and in most better markets it’s less than a week. 

What about the impact of mortgage interest rates?  Data shows that mortgage interest rates are on the rise (they got hammered late March), which is a challenge that investors and buyers will need to address.  Although rates are not outrageous by historical standards, they are higher than they have been in years – predictions indicate that rates on a 30-year fixed-rate mortgage are likely to hover around 5.5% by the end of the year.  But even with increasing mortgage rates AND higher home prices, the housing market would remain a seller’s market due to you guessed it… high demand and lower inventory.

Something else rarely discussed among real estate professionals is the fact that the Great Recession is still having a strong effect on the housing market. What do I mean? Every decade since the 1950s, this country has built 20 million + homes. From 2010-2020, this country built around 5 million. Toss in a pandemic and gunk up supply chains and experience a labor shortage and here we are. There are a lot of factors causing these that are the less talked about.  There just aren’t enough homes. 

The bottom line?  When the demand is satisfied, prices will stabilize & decline.  The housing market is in far better shape than it was a decade ago.

So… is now the time to buy?  There are always unforeseen variables that can alter the trajectory of the market at any time, so the best strategy is as true now as it ever has been: make sure you can afford the house you buy and still have room to save up for rainy days. Conventional wisdom still rings true… even today. 

Is an Open House a Good idea in this Market? 

So much has changed in the last 3 years when it comes to those tried and true real estate practices. With Covid, the open house has faced the most disruption. After all, a pandemic and inviting strangers into your home didn’t exactly mix well. But now that the pandemic is largely behind us, agents are dusting off their sign-in sheets and getting back into the swing of things. Some agents consider it a good thing to leave the open houses in the past, others see them as an important tool that needs to be brought back into the fray. 

Below are the pros and cons of open houses in a 2022 market…so if you’re a seller (or a listing agent), listen up!

Pros

More Buyers – An open house allows not only for more people to see your home. I always tell my sellers that the process is split into two sections. First, we market the property  (attract buyers) and then we sell it (showings and compel offers). There’s no doubt that an open house makes it easier to see a home, therefore, getting more eyeballs on the property. More eyeballs, more potential offers. Finally, having buyers through an open house means that there is a possibility there will be fewer scheduled showings which allows the seller to actually be in their home more than not. 

Low-pressure environment

In general, open houses are pretty informal and casual, which can help potential buyers feel more comfortable and allow them to really explore the house. Buyers are all different and pacing can be important. 

Allows for a second look

Often a buyer will set up an appointment on a Friday and then take a second look at the weekend ope house. This allows for parents, spouses, kids, etc all to take a look with the buyer. Sometimes they will bring a contractor to get a REALLY close look at the property which can mean more waived inspection scenarios. 

Gives more marketing “UMPH” to a property

Believe it or not, Zillow and realtor.com reward properties that have open houses. Meaning they will put the listing higher because an open house makes it more interesting and more likely to be “clicked” on by the consumer. The internet is all about engagement after all! If you’ve got a property that’s sitting side by side with others, it is something to consider. 

Cons

Unqualified Buyers & Neighbors

Open houses can certainly attract unqualified buyers, “looky-loo’s”, and “nosy neighbors”  You want the people walking through the house to be able to actually buy it, right? Agents don’t mind this because they have the chance to pick up a new client every time someone walks through the door, but these people generally don’t serve well in selling the home unless they want their friend to move into the area. 

Security Issues

An open house allows people to walk through a home with very little supervision even in this day and age of video surveillance. This can lead to potential thefts, damage, or vandalizing of property.  As unpleasant as it is to think about, the reality is that owners should make sure to remove or hide their valuables to lower the chances of something happening. I personally advise all my sellers to take anything they cherish out of the house including sentimentals, firearms, and jewelry. 

Less one-on-one time with potential buyers

An agent will usually be outnumbered during an open house, which means that not everyone will get personal attention, which can sometimes make or break a potential buyers decision-making. This can be especially detrimental for homes that are in some kind of disrepair. Sometimes, it’s strategically more sound to allow for only private showings because you can allow the buyer’s agent to explain what they’re seeing. I recently did an open house where I couldn’t be in two places at once and the home needed someone to explain some of the needed repairs. 

Slim chance of a sale

The vast majority of homes are sold when a buyer has an agent, requests an appointment, and tours a home privately.  The percentage of homes that actually sell as a direct result of an open house is less than 2-3%. These are the hard numbers and have been this way for years. However, the collateral benefits might make this number misleading. For example, if the open house rewarded the listing and made it visible on a realtor.com and then that buyer made a private appointment then it has served its purpose. 

Overall, the open house is probably still gonna be a thing for years to come but it is a bit of a lightning rod issue. Consulting with your agent (like me!) is the best course of action so they can walk you through expectations and the process as a whole. 

Why Won’t My House Sell?

Sometimes homes just won’t sell – but why? Here are some top reasons that could explain everything.

Pricing: The price is too high; this is by far the most common reason that a home is not selling in this market. Rarely if ever are we seeing a lack of demand – meaning sellers are enjoying multiple showings. However, if you have 30 buyers walk through your door on any given weekend and no one wants it, odds are that pricing is the culprit. Especially if you know all other factors have been addressed. When we price homes, we are very strategic in our approach because an overpriced listing can turn a home into a dud in a matter of days. I have clients who ask me what’s wrong with a house after being on the market for only 7 days. Ouch! 

Not Clean: Not sure of the part of the brain that is activated when a buyer sees grime, dust bunnies, and soot, but you can expect fewer offers and not as much enthusiasm from said buyers. This also goes for clutter and lots of stuff on the floor. I always tell my sellers that buyers will forgive you in closets, basement, and garages but all living spaces (places you entertain and sleep) should be tidy and clean. To be fair, most sellers get this and I don’t have to push them too hard to do this, but I am appalled at how some agents present their properties. Clean the place well for a weekend and let ‘er rip!

Neighbors: This is really tough situation, whether disruptive or their property is a mess, the seller has little control over this unless they have a good relationship with their neighbor. This goes for loud dogs (bigger ones especially) as well. My advice is to go knock on your neighbor’s door and explain what you’re trying to accomplish and 90% are cooperative. They’ll either leave for the weekend as well, keep their dog inside a bit more than usual, or clean up their yard. (I love dogs but not everyone does and so you need to market your property to as many people as possible.) 

Location: This one you can’t change nor is there much room for improvement. After all, you can’t change the schools, the topography, neighborhood, etc. I will refer to the above section on pricing and caution sellers from getting in over their heads on how much someone will pay for their house. Without the proper pricing strategy, you could not only get tagged for sitting on the market but then the location as well. Best to really pay attention to pricing strategy. 

So what to do? Hire the agent that is best for the job! One with a proven track record, experience, and online testimonials. You should ask your agents for this information. Believe me, if they are experienced, they will have no trouble telling you. In fact, you might have to stop them from talking about themselves. LOL. If they fumble through it and are less confident it usually means they will be less confident while pricing, giving you frank advice and even negotiating on your behalf.

Why Homeownership Will Always Be the American Way

Going back as far as I can remember, there has been this image in my head of the “American Dream”. It involves a modest house in the post WW2 era. It shows a white picket fence, dog running in the yard, father washing the car, mother planting flowers and kids playing out back. Most assuredly this has been singed in my mind from movies, TV and other medium over the years. But what was this image trying to convey? But what does that picture look like now? Has it changed?

Absolutely! The American Dream these days is not what is depicted in that image I just described. I would argue that harkens to a time when a country was finally at peace after a couple of decades of turmoil war and economic ruin. While the exact vision of this has changed in recent decades, the sentiment of the American Dream still rings true today when it comes to homeownership. The fact is homeownership is still very much an American thing and for good reason. Here’s why: 

Stability

Just ask the countless tenants that have been displaced due to landlords selling their homes recently. Without homeownership, you’re inherently at the whims of whoever owns where you live. Some have owned for so long that they may take it for granted but in the past year I have had too many conversations with tenants who’ve gotten “the call”. The landlord is “thinking about selling” which is usually just a way for the landlord to gently tell you what is about to occur. Landlords don’t like to freak out their tenants but use this phrase to plant the seed in their minds. For renters, this can be extremely disruptive not only from a financial and logistical perspective, but from an emotional one. If one has kids in the local school district this can be an especially distressing situation since they will usually want to stay within it. Owning one’s home is a tried and true way to have stability in their life. Some people are less concerned about this than others, but I sleep well knowing that I am the captain of my own ship when it comes to where my family and I live. 

Financial Benefit

There are some naysayers when it comes to the financial upside to owning a home. They claim the cost just isn’t worth it. They love the idea of someone coming to fix things with the house when they go wrong. If the roof starts leaking, they don’t have to worry about it. The landlord will come out and fix it, right? Well yes… eventually I suppose. But how well? How fast? Something that tenants fail to realize is that while the landlord has to fix your roof, they’ve also been paying that landlord’s mortgage for the last 15 years which has reduced the principal on the mortgage. Every month that goes by, the landlord stands to make more and more money in the event they decide to sell. This isn’t even taking into account the idea the home continues to appreciate year over year adding even more value and equity to the pot. I personally love when other people pay my debts and will gladly allow them to do so. I always tell renters, “Nearly everyone in this country pays a mortgage, it’s just a matter of whether it’s theirs or not.”

As American As it Gets

Going back to the days of colonialism and the wild west, Americans have always been about having their own stuff. Many of the colonialist settlers romped across this continent for 200+ years in an effort to find a better life. To find a place they could call their own. Today, this effort is still ongoing. Sure, it looks much different, but the reason homeownership is part of our identify is due to the fact that it is one of the underlying principles that make us American. We want independence and freedom from being told by others how to live (and where to live). To some, having a landlord is still like being under English rule. You may say that’s hyperbole, but I don’t think it’s far off. 

How Can A Realtor Assist You During A Natural Disaster

So last week was quite an event for our region with regards to Ida. In Greater Philadelphia, we saw several tornados which wrought destruction that is super rare for the area. A not so rare (and increasingly common) occurence was the flooding. The remnants of Ida brought with it an enormous amount of property damage and subsequent calls to emergency services and insurance companies. People are still digging out from a total loss of their home, airing out their basements or in some cases trying to find their car which floated away. Today I will talk about how real estate agents can be useful in times like these.

When I settle on a property with my buyers I nearly always tell them the following: “Congratulations! Just so you know, this isn’t the end of the road for us. If you have any questions, concerns, need contractors, etc. I want to be your first call.” The purpose of this statement is to make sure my clients do not feel alone after the homebuying process and that I am always available to assist either directly or through my network of contacts. This holds true even during the worst of natural disasters… the following are a few ways we can help/

Leverage our relationships: This one is the most obvious. Whether it’s contractors or those who provide professional services, the rule is the same. In times of distress, you almost always need someone’s help. Calling someone out of the blue from Google means you could be rolling the dice. Keep in mind that everyone will be calling them since that is how many homeowners find people in the first place. This could lead to slower response time and performance. An added bonus is your agent will have their finger on the pulse of what’s going on all the way to completion of the task at hand. Realtors can also provide context to this person so they know best to help you as quickly as possible. My team makes fun of me because I always say “I gotta guy” and guess what? I usually do! If I don’t, I 100% have someone in my network who knows someone who can help you!

New Finishes/Restoration: If you do suffer a total loss or severe damage there is a high likelihood you will replace what was there. Insurance policies make this possible through their claim process, but keep in mind that the exact thing doesn’t have to go back into the home. As tragic as it is, this scenario will allow you to update things and you should consult with your realtor to keep up to date on market trends. For example, I assume many who suffered a loss will go with predominantly grey finishes. Might not be the best idea at this point. This is blasphemy to some who read that last sentence but grey is starting to be called “flipper grey” which implies run of the mill and perhaps even cheap finishes. Another example is many of my buyers are claiming the granite in homes will need to be “replaced on day one” as it has fallen out of favor with market in many respects. Consult with an agent for the latest and greatest ideas in design and finishes.

Just a Helping Hand: A small community in Fort Washington, PA was devastated by a tornado where many of the homes are now condemned. We know many of the residents there and my real estate team was on the ground within 24 hours assessing the damage and just being there to help with logistics. Agents in these times can assist physically, financially and emotionally. I always tell my team this is a relationship business and these situations are no exception. There is a trauma that occurs when someone’s home is damaged and/or destroyed. People need support…plain and simple.

Insurance Quotes: The best way to avoid an insurance issue is to button up your policy and be absolutely sure that you’re covered just in case. Insurance is super cheap for those one-off events like fire or flood (when you’re not in a flood zone), so it is super important to go through all those scenarios with a skilled agent who has seen at all. Ask your realtor for someone they trust in order to at least shop the rate. Beware though that ot all agents are created equal.

My Biggest Concerns for Sellers Right Now

It’s hardly a secret that sellers have had the run of things recently in the real estate market. Seemingly, sellers can sell without regard to the area, time of year or price point. What if I told you that was a bit of a myth? Sure, there are instances where people pay insane amounts and waive all contingencies in order to secure property. However, I tell my clients all the time “Every market has its limits” and this one is no different. Now, I’m not saying that sellers no longer have leverage in this market. In some markets they most certainly do. But any market is not a monolith either locally or nationally. There are really hot areas and some where it is still 2017. The way some sellers approach this market has me concerned…here’s why:

Certain Markets Will Soften Sooner than Others – As I mentioned above, no market is the same across the board. Some areas will ride out any downturn due to its geography, schools, local businesses and larger community. These are larger metro areas with diversified economies. Others are going to be the first to see the effects of a cooling market. (This trend is already happening in certain sectors) Keep in mind, some analysts were watching the markets of FL, AZ, TX & OR in order to anticipate softening in more established markets such as the ATL-BOS 95 corridor. This is smart. A good tell-tale sign of whether you’re sitting in one of those markets, either in a small neighborhood or even an entire city/state, is if home prices and general real estate activities have gone bonkers. The old saying, “the higher they go, the harder they fall” is something to keep in mind. If a market is way up in a short amount of time, then logic (and history) dictate it will descend from grace… it’s just a matter of how far.

Waiting Too Long – Many sellers I talk to have said “I don’t think we’re at the top yet.” Really? What’s your reasoning? The country at large is in year 12 of its longest economic expansion. I’m not saying that we are on the brink of collapse or another housing bubble burst is imminent, however the economy will most surely correct at some point. The difference between waiting and acting could be several thousand dollars up to tens of thousands. My broker often states, “Pigs get fed, hogs get slaughtered.” I think this is good advice. The idea of predicting exactly where they are in an housing cycle is usually a fool’s errand. See 2008 as reference. Many thought continued growth was inevitable until it wasn’t. If you need to sell in the next 12-18 months, my advice is get that process started in case there is a more acute change in the market. Making repairs (contractors are really backed up), consulting with a realtor and keeping an ongoing discussion with professionals who are watching the market is a good idea.

Overpricing Their Homes – I can show everyone reading this article in a matter of minutes that you can absolutely overprice your home in this market. A startling tidbit of real estate is when you do, you usually end up with less money at settlement. Buyers can be quirky and in this market, I’ve had them walk into a house and say “I’m gonna find out what’s wrong with this house because it should already be sold.” That house was on the market for 12 days in a really desirable market. This can be seen as an eternity in 2021. That house ended up selling 30 days later for less than market price because there was no bidding war. The buyer was able to inspect and negotiated inspection repairs. Ouch. The correct strategy in my humble opinion in many cases is to list at market and allow a bidding war to float the price up. This takes advantage of the buyer demand and gets their competitive juices flowing which can translate to waived inspections and appraisals. This strategy is also a good way to ride out any softening market. One last tip is keeping in mind the $25,000 increments for pricing. What this means is don’t list your home at $426,000. List it at $425,000. Lenders often tell their borrowers they can search up to a maximum of such and such a number. Often it is to the tune of $400,000, $425,000, $450,000, etc. In the above example, anyone who has a max buying range of $425,000 won’t see the house if they’re sticking to their filters.

After all this, I must remind everyone reading this article that buyer demand is still strong, interest rates are low and bidding wars are just occurring. I’m not telling people to hit the panic button by any means. And while no one is in agreement about when the market will start slanting back toward buyers, there is almost unanimous agreement that it will at some point (many thinking within the next 12 months). So best to be prepared in case you gotta get out of dodge.

The Most Affordable Ways to Get Your Home Ready For Market

So you wanna sell your house? Great. You don’t want to do anything to prepare it for showings? Not so great. One of the biggest myths right now is that this market will allow for any home to be sold for any price in any condition. Just list it and sell it over the weekend. Right? Not so fast.

The truth is every market has it’s limits and I see people try to test those limits every day. One of my challenges when walking into a listing appointment can be conveying that while buyers right now will settle for certain things such as dated bathrooms, older windows & roof, etc, there are others they simply won’t tolerate… or at the very least… will be more reluctant about. Below I describe some AFFORDABLE ways a home seller can make their home more attractive to the marketplace and capture a net gain. (Make more money)

Paint – This is perhaps the most cost effective way to spruce up your home. The cost of painting the interior (even touching up) can go a long way as buyers assign the quality of your home with the level of attention to detail. Don’t forget, the buyers usually spend anywhere from 15-30 minutes at showings and that is a lot of time to get an impression. A good paint job says to the buyer the home is well maintained and the seller takes pride in their home.

Decluttering – You hear this one all the time. It’s important. Buyers don’t wanna see your stuff. My suggestions to home sellers is the more floor you can make visible, the better. This means at the very least getting things onto shelves, but I usually say, “if it’s not going with you to the new home, you can get rid of it now or when we’re under contract for a lower price.” Bonus tip: this goes for your neighbor as well. If they have stuff visible that you think potential buyers won’t like, offer to get rid of it for them or ask to clear it themselves. It might be just the reason they need to get it done finally.

Professional Cleaning – Much like painting, these details matter. While some homeowners pride themselves in their cleaning abilities, I prefer to have the people who do this all day, every day take care of this aspect. Cleaners are not expensive and often times get stuff clean you never thought needed it. Don’t forget about the windows and do it right before you list!

Landscaping & Mulching – Curb appeal is important not only for showings but for your online photos. Don’t forget a photograph rarely sells a home… it is simply a way to compel buyers to make an appointment to see the home. Make sure you primp not only the interior but the exterior as well.

Handyman – Use your agent to point out the things that they would notice when showing a home and fix it. Most times, these are simple (and cheap) fixes which can avoid sending buyers running for the hills during the showings. All these little defects can really add up and place an impression in the mind of the buyer about the quality of your home.

It goes without saying that every homeowner’s financial situation is different, however it has been my experience that the above tips and tricks really to go a long way in getting top dollar for their home. For now, the idea of considering a bathroom or kitchen rehab prior to listing your home is a thing of the past (but will be a thing again). With the high amount of buyer demand, simple steps can usually get the job done!

As a final note and to repeat myself from previous articles: It can’t be overstated how important consulting your real estate agent can be prior to prepping your home for market. I have seen lots of people unnecessarily spend money on things that are either not needed or even detrimental to the sale of their home. Never forget we are out in the marketplace and we are with buyers when they see homes. We know what they like, what they comment on and what makes them pass on homes. Ask for help, that’s what we’re here for.

The “New Normal” of Real Estate Sales

I’m a realtor. Like any industry behind closed doors, my colleagues and I talk shop about the state of the industry. Not entirely earth-shattering stuff here. However, we have started talking about how things were even just a year ago. How things have changed. How we used to have full inspections, appraisals were rarely an issue, how so many agents had never done a “rent back” agreement and so on.

In fact thinking back to my deals last year, I am not entirely certain many of them would have gotten to settlement in this current real estate environment. Maybe you’ve all seen the video of the guy selling an apple to poke fun at this robust market. We are in unprecedented times for sure. I know this because 40-year agents are saying the market has never seen this, but I remind them we just went through something unprecedented in this country. Rest assured, things will return to some semblance of normal but for now the following are certain things that are commonplace in offers and if your agent is not using them, they should be.

Rent Backs: As I mentioned above, these have really come in handy. Formally called a “Post-Settlement Possession Addendum”, they essentially allow a buyer and seller to settle on the property, but keys aren’t transferred. The seller becomes the tenant and “rents back” from the buyer. These are usually short term (30 days or less), however can be longer. This is appealing to sellers because one of their main worries is where they will go once their home is sold. Furthermore, it releases the seller from having to attach a settlement contingency to their offer on their eventual new home. (I need to sell my house in order to buy yours). Downside is buyers have to wait for possession and might enter into a potentially open-ended landlord role if the docs aren’t written right.

Appraisal Overrides: These have become so commonplace, in certain areas and neighborhoods, you won’t get a second look without them. These were not used nearly as often as even 12 months ago, but they are now all the rage. What this says is the buyer will come with extra cash in the event of a low appraisal. As bidding wars escalate purchase prices, every dollar north risks a chance of the appraiser not finding value. Sellers realize that buyers can just write a number on a sheet of paper in order to get a contract, but they want added assurance the buyer will fulfill that price if needed. This requires the buyer to have extra cash which would normally be designated for costs associated with the move (including closing costs)

Getting Creative with Inspections: Depending on the property, waiving inspections is not as big of a deal as others. A condo which is 3 years old is much different than a 250 year old farmhouse with septic and well water. The “new normal” has forced agents to get creative with this contingency. So on the spectrum you have everything from a full battery of inspections to a complete waiver of them. In between is where the art is and can be the difference between a signed deal and a “sorry, maybe next time.” An example is what’s called an “informational purposes only” inspection. This means the buyer can inspect, but there is a tentative agreement between the parties that there will be no repair requests of the seller. Another scenario is where the buyer agrees to absorb the first $xxxx of repairs discovered by the inspector. This is again a way for sellers to be sure they won’t be nickel and dimed to death by small fixes. In those cases where a seller is gonna demand we waive inspections, I have another trick up my sleeve which allows us to do so, but still inspect. I can’t divulge this to the public as it is one of my competitive edges so contact me for more details. 🙂

Of all the things that are most important in this business right now is the ability to sell and I remind my team of 10 agents of this often. I also remind them that “the confused mind says no” to the point they probably want to hit me, but it is a very old sales truth. Understanding the ins and outs of these tools and convincing sellers (and their agents) that you’re a safe bet is a very large part of an agent’s (and their client’s) success right now.

Financial Freedom Through House Hacking

OK, so let’s put our real estate investment hat on for a few moments. House Hacking. You might’ve heard this term thrown around while talking with your investor buddies or on a podcast. Or maybe you’re a investor and know exactly what this terms means. If you have no earthly idea what I am talking about, read on…. my hope is you can learn something here as I have had multiple clients employ this strategy with favorable results.

So the typical residential real estate investor will purchase a property and either lease it or flip it. Either way, the investor rarely lives in the home for any substantial period of time and usually not at all. Conversely, the typical real estate buyer plans to live in the house. These are your Bob & Nancy Smith’s of the world buying a home on the open market. The real difference here is occupancy. However, what if there was a hybrid option? Someone was to buy an investment and decide to make it their home. How does that work? If they live in the house, then how is it an investment?

Welcome to the Wonderful World of House Hacking. Usually, this investor lives in one part and either rents out bedrooms and/or other units (if it’s a multi-family…duplex, triplex, quadplex). What’s the advantage? Financial and leverage!

If you’re mortgage is $1200 but can rent the other two bedrooms for $500 a month, then your housing costs just dropped to $200 a month. Yes, you read that right. That is far cheaper than any housing expense you could get otherwise. Essentially, the tenants pay your debt and you can live virtually mortgage free if you set it up the right way and make the numbers work for you. I have several clients who have done this or looking for this scenario currently because it makes a ton of financial sense.

The drawback of course is you have to deal with tenants and someone else living with you, but with a little luck you can find terrific people who just need a bedroom. If it’s just one house, you would share common spaces so it’s important the setup is appropriate. But always remember you’re the owner, roommate AND landlord!

If this idea excites you, note there are cases where the owner MAKES money every month because the tenant’s rent covers the mortgage and then some. Put another way, the tenants pay you to live in your own house! Who with a mortgage hasn’t wondered about how their financial situation would change without a housing payment? For the creative and flexible people out there, financial freedom through real estate can be had which frees up your cash to go invest in the stock market, go on vacations, save for college, pay down other debts or …wait for it… buy MORE real estate!