Dig into what makes the market tick.
Aaron's Thoughts on Interest Rates
We're all waiting for the shoe to drop, for the rates to come back down, and to get a sense of inventory back into the marketplace. I was taking a shower a couple days ago and had a thought:
How do these mortgage lenders make their money?
I'm not sure if you knew this, but I used to be a Mortgage Loan Processor with NorthCountry Federal Credit Union. This career was ultimately what led me into Real Estate to begin with. The answer to the above question is simple. One-time fees when you take out a mortgage, and interest paid. Take a look at this graph from an Amortization Calculator I found online:
The light green line represents the interest paid during the loan term. You see how it shoots straight up right in the beginning of the loan term, and the principal paid takes up until about 2044 to really start getting paid down? That's how they make their money.
My prediction? Once we put a few more years under our belts (3-5), the interest rate will drop to incentivize both one-time fees as well restarting this amortization schedule so that interest collected up front restarts and banks can shock their revenues once again!
Aaron's Take on Income
I share this article due to the nature of it, showing exactly how much has changed in the past few years and how drastic it has become!
Have wages followed suit? Of course not. There are creative programs out there. Being a Full-Time agent out in the field, I have many resources available to me to help anyone navigating this new economy, and am here to help. This isn't just a business for me, it's a way to guide people going through what I went through with my family as well. Having 5 kids and navigating this new world hasn't been easy for us either. I'm here to make it easier for you.
Here's How Much You Have to Make to Afford a Starter Home in the U.S.
What you need to know as a Buyer or Seller (Influenced by the NAR situation)
This whole situation has been a publicity nightmare, and I'd like to think that the biggest impact that has caused such confusion (and false information) were news outlets and people who are not actively involved in this industry creating news articles regarding concepts that they know nothing about. I'm going to lay out what practices were targeted, why, the pros, and the cons. Overall, two MAJOR things were happening in the field (not by me or by anyone in the firm that I run):
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Buyers were being "represented" by agents without written agreements hiring an agent to represent them. Legally speaking, this is a big no-no. In order to protect a buyers' best interests, they must hire an agent to represent them. In that agreement, compensation to that agent is outlined. In many cases, compensation was being offered by Sellers of property as a way to open up the Seller's Buyer Pool to include all buyers currently searching for property, taking an additional expense off of a Buyer's plate to allow for more competition (and thusly, more offers, and a higher sale price for the Seller.) In the State of Vermont, if an Agent does not represent the Buyer, they cannot negotiate on that buyers behalf, give the Buyer an opinion regarding the price of the home, and cannot disclose ANY information about the home that isn't a Material Fact that would otherwise harm the Seller's negotiating position (Material Fact: A fact that would influence whether or not someone would buy the home). An example of this would be if the "Buyer's Agent" in this case knew that the Seller was under a court order to sell and needed to move it quickly.
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Listing Agents were not explaining why Sellers were offering Buyer's Agent compensation correctly. It's not that a Listing Agency charges X or Y, and then splits X or Y in half to compensate the Buyer's Agent. The Listing Agency charges their own amount (which has always been negotiable), and then the Seller can CHOOSE to compensate a Buyer's Agent in order to achieve what I explained in point number 1. If the Seller does not want to offer Buyer's Agency Compensation, the Buyer and their Agent will need to work out how that Agent is compensated in order to make an offer on your home! They can always ask if the Seller would be willing to (if it's not publicly advertised that they will).
About the NAR Lawsuit - What Exactly Happened?
Here's the scoop on this subject before the headlines paint a skewed picture of exactly what happened.
"Realtor's Settlement Could Dramatically Change Cost of Housing Sales - Washington Post"
The short story is, there were some agents/agencies (not us) doing a terrible job of explaining how home sales work. And in turn were failing to explain your rights as the consumer when it came to listing property. The easiest way I can explain this is as follows:
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Agent was listing a home, and instead of explaining to the Seller of a home how the commission works, they were asking for a flat percentage, and the saying that they would be splitting their commission with the buyer agency.
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The reality is, the home seller is able to offer what commission to pay out for a buyers agent, the listing agency does not set this price.
You might be scratching your head. "Why in the world would the Seller of a home pay for a buyer's agent?"
The reality of it is, an average buyer has many costs associated with purchasing a home. Down Payment, Closing Costs, and without the help of a seller, Realtor Fees. About 80% of buyers can barely afford just the first two items. Sprinkle some Realtor fees into the mix, and the Buyer pool that a Seller has access to is now dramatically smaller, thereby making the pool of potential candidates smaller, and lessening demand.
We expect to see some changes here in Vermont as far as how compensation is provided towards Buyers Agents, and this could mean that Buyers Agents will now need to present their clients offers with the compensation they would like to request from Sellers, if applicable.
Will this cause prices to come down and solve the problem? No way. But this will make it MUCH more competitive for Buyers out there. There will likely be no change to the rate of inflation, home costs, or the like. This can result in less costs out of pocket for a seller, but will depend on the compensation agreement between that buyer and their agent/agency.
Always happy to discuss this further, but based on how I've practiced in my business, I don't anticipate any changes on my end. Who you work with matters. There are good and bad in any profession (mechanics, doctors, accountants, lawyers, etc.).
If you have any other questions, fill out the form located here:
About Assumable Mortgage
See what Aaron Scowcroft has to say about what we can expect regarding mortgage rates coming into 2024.
Something to consider if you ever plan to buy a home or list your home is the current loan program on the home you are buying (or listing) and how this might impact marketability for that property, or what your options are as a buyer!
Banks don't want you to know this, but having a background in Mortgage Lending, I still know a few tricks. The least known trick is what's called the Assumable Mortgage.
For the easiest reference, I'm going to provide the link to my clients Cheryl & Bob's house on Zillow, located here:
322 Bonanza Park, Colchester, VT, 05446
For easy math, these two currently have a mortgage on this home for roughly $250,000.00, at a rate of 3.50%. This is an FHA loan. ANY Government backed loan can be assumed (VA, RD, USDA, FHA, VHFA). Their list price is $460k for all intents and purposes.
ANY person can apply with my clients lender to assume the $250k loan above at that same rate, and continue with the current place in that loan. In order to do this, that buyer would then have to come up with the difference in cash ($460,000 - $250,000 = $210,000 needed to close) plus closing costs. It's a lot of money, of course, but if you can snag a mortgage for $250k at 3.50%, you're WAY ahead of your competition.
Perhaps this applies to you? Perhaps it doesn't today. Either way, hope you learned something!
About Mortgage Rates
See what Aaron Scowcroft has to say about what we can expect regarding mortgage rates coming into 2024.
A true testament to the volatility of real estate over the last few years. Interest rates seem to have a mind of their own these days, according to Business Insider:
Despite all this, activity remains high, and competition is still fierce if you're looking to buy. As it seems to be each year, that 3rd week in February is that magic milestone where everyone starts to thaw out and get out into the market. Given the average mortgage takes about 45 days to close, purchasing a home now puts you into that home in Mid-April. A bit more manageable of a time to move, in my opinion.
So what's the game plan? If you're buying, renew that pre-approval (they expire after 90 days), and talk with your Realtor about your gameplan to make sure you've got the pieces in play needed to put your best foot forward. If you're selling? A clean house, fresh coat of paint, and packing extra belongings that don't add value to the presentation of the home is a good first step. Store these items in a garage or basement to open up the living space.
Everyone’s situation is unique, so don’t take the above with a grain of salt if it doesn’t apply. Reach out to someone on our team to get a better sense of your position as it relates to the current real estate market.
If you have any other questions, fill out the form located here:
Mortgage Rates falling?
See what Aaron Scowcroft has to say about what we can expect regarding mortgage rates coming into 2024.
As we see the mortgage rates continue to drop, we are seeing a surge of activity from buyers and sellers alike as it becomes more affordable to make moves. Check out this article from FreddieMac:
https://www.freddiemac.com/pmms?fbclid=IwAR3ACVajWU-UiHagWqcOGseXh-dWVSelKZi9bdDOGqnqREzT9suvCikvdTo
As we prepare for the Spring, here are a few things to consider:
As a buyer, there is less competition in the market this time of year due to the weather. If you're able to swing it, and can get into housing.
As a seller, the ratio of buyers to inventory is about the same. There is no inventory, therefore, the likelihood of selling is still high, and the chances of landing a serious buyer are much higher, given who trudges through the snow for fun?
Each situation is unique, so to be sure we have the right strategy deployed, let's circle back and have a conversation to make sure we're on the same page.
If you have any other questions, fill out the form located here: