Part of the American Dream is to own a home. Everyone want a place to call their own; raise their family; feel secure; create memories; and share with their friends. Emotions create the desire to own a home but in an uncertain economy, buyers need to justify the decision with logic. Some people are afraid to make the wrong decision; they need help from their real estate professional.
Agents have not been trained in recent years to explain why home are a good investment. They've actually been encouraged to delegate questions about mortgages to lenders and tax professionals. Consumer's difficulty in getting mortgage financing is today's biggest problem in closing a transaction.
Consumers want and expect agent's help in finding the "right" home but also help negotiating the price and terms, finding attractive financing and coordinating with other professionals. Article 11 of NAR's Code of Ethics even requires residential REALTORS provide their clients and customers the services which are reasonably expected.
In what is arguably, the best home buyer's market ever based on prices and interest rates, there should be a feeding frenzy of activity. While the now expired tax credit encouraged some people to buy, showings and new loan applications have fallen considerably since April 30th.
People still want to own a home. Some homeowners want a bigger or different home. The challenge is to help them overcome the fear of making a bad decision. They're unsure about values in the future and the monthly cost of housing.
As Houston REALTOR Rita Dehmer says "Whether you rent or buy, you pay for the house you occupy." You have to live somewhere and you don't build equity renting. Two components make up housing affordability; price and interest rates. The price adjustments in the past two to three years provide an attractive discount and mortgage rates haven't been this low since Eisenhower was President.
What's keeping buyers from buying? Why aren't they taking advantage of the market adjustments in price? Why aren't they taking advantage of the lowest interest rates in over 50 years?
A real estate professional needs a program that provides information and tools that are easy-to-use and easy-to-understand. A real estate professional must have a program that allows him or her to "show" a buyer rather than "tell" a buyer.
I'm excited about this program because it's the silver bullet needed to overcome the challenges agents have putting transactions together in today's market: get buyers off the fence and improve the marketability of the home.
There are lots of calculators on the Internet but I'm especially excited about these because they work so well to help your clients make specifically better decisions.
Let me show you what I'm talking about. "Whether you rent or buy, you pay for the house you occupy." By using this Rent vs. Own, you can easily "show" a prospect what their real cost of housing is once they take into consideration their tax savings, appreciation and amortization. You can "show" them how much more they're paying in rent and losing annually. You can even "show" them how their down payment will double, triple or more in just a few short years. This is an amazing way for a buyer to see why they should act now.
"As a result of this class, I was able to close one sale and one listing earning over $9,000 that I wouldn't have made otherwise. This course really sharpened my professional skills." John Holdren, CRS, RE/MAX Properties, Colorado Springs
Let's look at another example of having the right information and tools will help a buyer to make the right decision. You call a prospect you're currently working with and they tell you they've decided not to buy. Why you ask why, it's because they've heard so much conflicting information from news, on the Internet, family and friends. They've just decided not to buy until later.
You suggest they put the money they have for a down payment away safe so they'll have it when they feel the time is right. you show them that if they put it in a savings account, they won't earn much but it will be safe. Then, you compare that to investing it in the stock market where they could earn more but there is more risk. Finally, you remind them about what you talked about on your first meeting. Homes are a form of leveraged investments and the down payment will grow considerably more in the same period of time; possibly doubling or tripling in value. "Where do you think is the best place to invest your down payment?" This simple app makes it so obvious.
"Pat's RFC course and Internet based apps contain valuable information to give an agent a decided advantage over the competition and a unique marketing position." Mark Minchew, CRS, RE/MAX Austin Associates, Austin, TX, 2010 First Vice President for Council of Residential Specialists
Seller contributions are fairly commonplace but they're mostly used to pay the buyer's closing costs. FHA, VA and conventional loans allow the seller contributions for temporary buy down of the interest rate. A widespread program is the 2/1 buy down where the seller subsidizes the payments for the first two years so that the buyers payment is based on 2% less than the note rate in the first year and 1% less the second year.
This program is a standard conforming fixed rate mortgage that requires the buyer to qualify at the note rate so they can afford the home when the payment returns to normal. The advantage is that the buyer gets into the home with cheaper payments for the first two years. Based on the amount of the seller's contribution, it could be a combination of buy down and closing costs. The terms will definitely have an appeal to a buyer in the same way a lower price does.
"Thanks to you, I became a hero, pro and genius in one negotiation. I received a WAY low offer on a new listing...and filled the gap with a full price offer with a rate buy down and got the buyer and seller on the same page IN ONE COUNTER!" Brian Copeland, CRS, Village Real Estate Services, Nashville, TN
With currently low fixed interest rates, very few people consider an adjustable rate mortgage. However, for some buyers, an ARM will provide their cheapest cost of housing and can save them loads of money.
ARMs are not right for everyone. For a person who knows they will only own the home for a few years, it could save them hundreds of dollars per month. Imagine a person had a history of being transferred every few years and knew they wouldn't be in the home long term. A 5/1 ARM would give them a much cheaper house payment for the first five years. If they're certain they won't be in the home for five years, it is almost imprudent for them to consider a fixed rate mortgage.
The advantage comes when you can see what the monthly savings will be and in a worst-case situation, how long it would take for the savings from the early periods to be exhausted which would be your break-even point.
"I have been in the finance industry for over 30 years and really, really thought the class was AWESOME!! There are so many tools that we can utilize with our clients in an everyday situation." Debbie Havens, Professional Mortgage Consultants, a Wells Fargo Home Mortgage Affiliate
Advice can easily be provided to current homeowners to help them with their decisions also. Imagine a past client who calls you curious as whether to refinance or not. You can give them an analysis in moments that will show what they'll save monthly and how long it will take to recapture the cost of refinancing.
This service gives the professional the chance to serve their client again during the interim before they move. It might also provide valuable information as to when they intend to move. Or the creative agent might suggest that with the lower rates, they might consider getting a larger home for the same payment currently being paid.
"Awesome class - most useable' information I've gotten in years! Thanks Pat" Ann Stewart, Ebby Halliday, REALTORS, Dallas, TX
Residential Finance Consultant is a program of tools and information to help buyers and sellers understand the tax advantages, financing alternatives and investment aspects of homeownership. It is much more than the powerful one-day class that shows you how to use the apps and equips you with valuable scripts and dialogs.
Each month, there is an online session to keep you up-to-date, deliver new marketing materials and remind you of different tools available. You can watch the sessions live or revisit the recording over and over.
The marketing materials that are part of the member website make it easy to promote the unique selling position created with this program. You're able to personalize the Word documents and customize them to meet your individual needs.
The objectives of the RFC are to:
- Get buyers off the fence
- Make listings more marketable
- Help buyers and sellers make better decisions
Finance is like food - the more you know about it, there better you eat. Professionals know they must be familiar with all aspects of a transaction in order to protect the interest of their clients. It isn't enough to be able to find the "right" home in today's market. The "right" home without financing will never have the buyer's address.
Interested in attending the RFC Discovering the Finance Difference class, check the schedule.
Interested in bringing this training to your company or association, contact Pat Zaby