Catching A Fallling Knife Just Might Be Your Best Bet
A fear among buyers these days is that of buying a property that will be worth less next year… or next week, for that matter.
Since many homes are now selling at discounts of 30% – or more – off their prices back in 2006, and there is no evidence that prices are ready to turnaround and rise – it’s a fair fear.
As many of you know, I’m not a cheerleader who goes around telling everyone that the best time to buy real estate is NOW.
It’s just not my style… and I’m not Nostradamus.
Prices could continue to tumble for several more years, for all I know. However, if history is any guide, I can make the argument for a purchase in today’s Atlanta real estate market.
With the current economic policies of the Obama administration, we are in for some very high inflation. Some believe that at the rate that U.S. currency is being printed, we might even see hyperinflation if the presses aren’t stopped.
When inflation runs rampant, interest rates must rise – and that includes mortgage interest rates. When Jimmy Carter entered office, mortgage interest rates were around 9% – but Mr. Carter printed a lot of money… and interest rates rose substantially. By the time he left office four years later, rates had jumped to more than 14% – and didn’t peak until two years later at 18%.
But Jimmy Carter was a mere piker compared to Barack Obama.
When you consider that the money supply is being doubled this year – you can only imagine where interest rates are going. One thing is certain – the rates are heading up. Big time.
Let’s look at a $200K mortgage at today’s rate of 5.25%. The monthly principle and interest payment on a 30 year fixed rate note would be around $1104. If property values dropped another 40%, but interest rates jumped to 10%, that same property with a $160K mortgage would have a monthly payment of $1404.
Now let’s look at it another way. The property with a $200K mortgage today was probably worth at least $260K a few years ago. The price would have to fall more than 50% off the high to $126K to have a similar payment of $1106 with an interest rate of 10%.
When you consider that mortgage interest rates are very likely to go much higher than 10% – and that hard assets like real estate become very desirable as a hedge against inflation – you can see why "catching a falling knife" could be your best move.
As always, if you have any questions regarding real estate in the greater Atlanta area, feel free to contact me here.
In a time when the very fabric of our free nation is at risk of being torn by those who want our country to be more like a European – or Middle East – nation, I appreciate the service of my fellow military men and women more than ever.
Perhaps I feel differently about this day because I am a U.S. Navy veteran. Like many others who have served, I get a little choked up on this day. To me, it’s not simply a day of celebration – it’s a day of solemn observance.
I truly appreciate all of those who gave their lives or limbs to help create and protect the greatest country in the world. Most of us will never know the sacrifice that these great men and women selflessly endured so that we could live in freedom – and sadly, many do not appreciate the freedom of which these patriots gave their lives.
While today is a day of remembrance for those who have fallen, every day is a day of appreciation for our uniformed men and women. When you see a man or woman in military uniform – go shake their hands and thank them for their service. Since 9/11, every single one of them is a volunteer during wartime – and they deserve our respect and praise.
It is reported that over 500,000 first-time homebuyers have taken advantage of this program since its inception – and if you are a first-time homebuyer interested in Atlanta real estate, you might want to keep an eye on these developments.
Buying A Home In Atlanta Remains A Highly Personal Choice
Home prices in the greater Atlanta area are now as low as they were five years ago – and in some cases – ten years ago. Home mortgage interest rates are at near all-time lows. It is a buyer’s market, no question about it.
In spite of these factors, the economy is soft – and there is no evidence that the housing market is firming up. Home prices could continue to fall – or rise – in response to market forces.
What is the potential buyer to do?
If you are hoping I’ll say "Now if the best time to buy!" – allow me to apologize, as I can’t be your cheerleader. Many buyers are cautious and skeptical right now – and who can blame them? No one wants to catch a falling knife.
The real question is "are you right for the market?"
Many potential buyers are not good candidates right now. If you are not secure in your job or source of income, this might not be the best time for you to buy. Just because you CAN buy a home doesn’t mean that you SHOULD. After all, that’s what got us into this global economic mess.
If you are willing to buy and hold for the longer term, then your biggest hurdle will be finding the best property in the area of which you want to live – and paying the right price. In our current market, it is essential that you get into the property at the lowest possible price to protect yourself from potential loss.
In other words – you have to buy "below market".
So if you are secure, able to find a good suitable property and negotiate a below-market price – then I would say it’s probably a good time for you to buy a home in Atlanta right now.
Straight Talk Is Getting Harder And Harder To Find
As I scan the Atlanta real estate universe, I am often saddened by the news… and angered by the cheerleaders who are more interested in making a quick buck than protecting their clients.
When I speak directly to the public or my clients – I am cautious on their behalf. I often preface the hard, cold facts with, "Let me tell you how the cow eats the cabbage…"
Well yesterday a client asked me, "So exactly how does that cow eat that cabbage?"
That got me to thinking. Where did that saying originate? I’ve used it for at least 20 years… but never knew its origin, though I remember I picked it up in Texas. With the help of our friends at Google, I was able to find this amusing story for your enjoyment:
We’ve been listening to a lot of our famous southerners lately, so today we’re gonna take a look at the one of our more common sayings. We southerners know that when someone begins anything by saying, “I’ll tell you how the cow ate the cabbage”, this person is fixin’ to tell us like it is. We also know that chances are, we’re not gonna like what we hear. But do you know where the phrase came from? Neither did I, until I began to research its origin.
Now, I’ve heard this familiar story before, but never as an explanation for this expression. All I can say is, if it’s not true, it should be—-and in the tradition of southern storytellers, that’s enough for me.
Once upon a time, a circus came to a small rural town. While they were putting up the big top, a baby elephant escaped and found his way to a little old lady’s garden up the road. The lady in our story couldn’t see very well, but she was alarmed enough to call the police and report a cow in her cabbage patch pulling up her cabbages with his tail. The policeman on the other end of the line listened patiently, “A cow is eating your cabbage, ma’am? We’ll send someone right out."
“I never said he was eating ‘em,” the lady said.
“No?” The policeman replied. “Then what is he doing?”
The woman hesitated and then exclaimed. “You wouldn’t believe me if I told you!”
So, there you have it porchers, now you know why telling someone how the cow eats the cabbage can precede a very serious discussion.
~Shellie
So, when I tell you how the cow eats the cabbage – chances are it’s not going to be what you were hoping to hear… but it will be what you NEED to hear.
As always, if you have any questions regarding real estate in the greater Atlanta area, feel free to contact me here.
In Today’s Market – Mistakes Are More Costly Than Ever
Are you the kind of home buyer who wants to deal directly with the listing agent? Do you believe you’ll get a better deal if there is only ONE agent in the transaction? Have you bought and sold a few homes – and now consider yourself an "experienced" home buyer?
I suggest that even experienced home buyers can make some costly mistakes. Today’s case in point is a new home that I had under contract with a client back in December. The home was originally listed eighteen months earlier for more than $450K, but had been dropped to $385K when we first saw it.
Our contract price – minus closing cost – was a little less than $350K. My client, due to a change in finances, could not complete the transaction… and the home was brought back on the market.
For some unknown reason, the listing agent jacked the price up to $440K – which is quite a shock, since our real estate market has not improved over the last few months. And then it became obvious, as the home went under contract.
By raising the price, the listing agent could "get the buyer a great deal", as there would be lots of room for negotiation.
So I have patiently waited for the listing agent to show the listing as SOLD so I could see what the final sales price was. After several weeks following the proposed closing date, I checked the tax records to find that the home did sell – and sold for $430K.
To make matters worse, the buyers not only overpaid for the property – they put more than $80K down on the purchase… and they still need to sell their existing home (which seems to be overpriced, as well).
I could have saved this buyer more than $70K - which would still be in his bank account – if he had come to me before calling the listing agent.
To recap – the listing agent represents the seller. When you deal with a listing agent without representation – you can lose a great deal of money.
As always, if you have any questions regarding real estate in the greater Atlanta area, feel free to contact me here.
New GAR Rental Agreement Not Without Some Big Surprises
When most consumers review real estate documents, they assume that the pre-printed language is set in stone – and that everyone must agree to those portions of the agreement or you will have no agreement…. not unlike the Terms of Service you must agree to before using most software or certain websites.
In our last incarnation of the Georgia Association of Realtors Residential Lease Agreement, I find a pre-printed section that defies my best logic. Section 20 states:
Upon 24 hours advance notice to Tenant, Landlord shall have the right Monday through Saturday for 9:00AM to 8:00PM to access Premises of Property to inspect, repair, maintain the same and/or to show the Property to prospective buyers. In the case of emergency, Landlord may enter Premises or Property at any time to protect life and prevent damage to Premises and Property. In addition, during the last ___ days of the term of the Lease, and during any period when Premises is being leased from month to month, Landlord may also place a "for rent" or "for sale" sign in the yard or on the exterior of any dwellling on Property, may install a lockbox and may show Premises to prospective tenants or buyers. In the event a lockbox is installed, Tenant shall secure jeweelry and other valuables and agrees to hold Landlord harmless for any loss thereof. For each occasion where the access rights described above are denied, Tenant shall pay Landlord the sum of $_______ as liquidated damages; it being acknowledged that Landlord shall be damaged by the denial of access, that Landlord’s actual damages are hard to estimate, and the above amount represents a reasonable pre-estimate of Landlord’s damages rather than a penalty.
Since this is in the pre-printed portion of the agreement, it appears to be normal "boilerplate" language that the tenant might presume is applicable to all who rent property.
May I submit to you that it is NOT.
I would never allow a client to agree to this language before they fully understood the ramifications of this section.
First, let me say that I am not an unreasonable person. I understand that the Landlord needs provisions to protect his or her property… but this language can be used to destroy the quiet enjoyment that a tenant should expect to receive when leasing a home.
For example, this provision allows the Landlord to make daily incursions – without limitation – six days a week, eleven hours a day… marching prospective buyers (also known as strangers) through the home.
Keep in mind that the subject property is not the Landlord’s home… it is the Landlord’s HOUSE. It is the Tenant’s HOME.
If the Landlord wishes to market the property and conduct tours of the premises with prospective buyers – then maybe they should look into getting a House Manager, who will keep the property in showing condition and pay a substantially reduced rate of rent for the inconvenience.
A compromise that can help the Landlord sell the property while protecting the Tenant from unreasonable disruptions from quiet enjoyment is by writing language into the lease that provides for showings only to those buyers who have placed the property under contract, subject to an inspection contingency.
I would encourage anyone who is entering into a lease or purchase agreement to seek the advice of an experienced broker or real estate attorney.
As always, if you have any questions regarding real estate in the greater Atlanta area, feel free to contact me here.
This morning, I listed a barely used horse saddle for sale on Ebay. New, this saddle and accessories cost more than $400. I started the listing at $160 and also implemented the Buy-It-Now option for $250. A bargain, no question about it.
Within an hour, I had an email from a buyer who wanted me to end the auction early so that she could buy the saddle for $200 – and moments later, another buyer used the Buy-It-Now option to complete the purchase.
The first buyer could have placed a bid for $160 to start… but she knew that the bidding would go much higher than that. Instead, she figured she could offer me $200 to end the auction early – and she would "steal" the saddle.
The second buyer – recognizing an outstanding value – jumped on the Buy-It-Now. She knew that $250 was a good deal – and my 100% feedback gave her the assurance she needed.
This isn’t the first time I have seen this behavior on Ebay. While one buyer is trying to "steal" an auction – another comes along and makes the purchase. The exact thing happened a few months ago while I was selling a camera lens. While one buyer was telling me that $600 was a good offer – another was making the purchase for $900.
The same principles apply to buying real estate.
Last month, I worked with two different buyers who placed offers on seperate foreclosed properties. In the first case, I showed the first client a home back in late November when the home was priced at $150K. When asked how much the home was worth, I told my client that it was worth $130K – and that we should wait until the price is reduced, as the seller will not want to take that big of discount off of list price.
Why? Because instead of dropping $20K, the seller will test the market at $10K less before accepting $20K less.
We waited through several price drops until the property was listed at OUR price. Then we asked for a generous contribution from the seller towards the buyer’s closing costs.
My other buyer wanted a home that was priced at $175K, but was worth $155K. The seller dropped the price to $145K in the hope of getting multiple offers – which they did receive. Our offer was the strongest – and the seller countered us, offering to meet us halfway on closing costs. Instead of countering back – my client decided to stand pat on her offer. Take it or leave it.
Although the seller’s counteroffer still priced the property below market – my client did not care. She thought they should take our offer with no counter-offer. So, the listing agent will counter one of the other prospective buyers… and someone else will get the home.
This isn’t the first time I have seen this happen. Many people are confused about what they should offer – as well as what they should expect. My advice is to look for value and work from there. When a property is priced right – don’t expect the seller to meet your aggressive offer with an abundance of joy – not even in this market.
As always, if you have any questions regarding real estate in the greater Atlanta area, feel free to contact me here.
Those Within The Housing Industry Are Most Vulnerable
While most of the nation can appreciate the devastation in our housing market, most can not understand the pressure put upon those who derive their living from it.
Many people may believe that all of those idled construction workers can simply find other means of work. Others may believe that all of the other tradespersons and professionals such as appraisers, real estate agents, real estate attorneys, home inspectors, mortgage brokers and others can simply fill out an application for a position in an unrelated field and get hired without a great deal of difficulty before their unemployment benefits run out.
It ain’t that simple.
In the past year, I have witnessed several of my colleagues lose their homes to foreclosure. Not just a few, mind you… and not just those who have been in the business a short time. Some have been successful agents for many years. In our business, there is no unemployment insurance. When you can no longer afford to stay in this business – there is no safety net.
But much worse than that, I have also witnessed several colleagues lose their lives, as well. All relatively healthy young men in the prime of their lives – taken by heart attacks. In the last few months, we have lost an appraiser, 47; a builder, 40; and a Realtor, 43 – and those are only the ones I am aware of, as there are undoubtedly others.
Unfortunately, our legislators do not want to face up to the fact that they created this mess in the first place – nor do they want to address the fundamental problems in the housing market. Chris Dodd and Barney Frank want nothing to do with the spotlight that would reveal their complicit behavior in the Fannie and Freddie mess.
Instead, our legislators want to pass another giant spending bill to pay back all of their cronies who helped them get elected. The housing crisis? Maybe they’ll talk about that when we get to the third or fourth trillion.
Let’s look at the first $350B – it has been revealed that the taxpayers overpaid $78B for the "toxic" assets that were acquired. So Congress not only bought "toxic" assets (which they should have picked up for pennies on the dollar) but they managed to overpay for them. Now there’s something Congress is good at – overpaying!
What did these banks do with the money? Buy other banks!
In the last housing bill, Congress did add a $7500 tax credit for first-time homebuyers – but they removed the down payment assistance programs. To make matters worse, the tax credit was actually a no-interest loan that had to be paid back – instead of being a true tax credit. Many buyers could no longer buy.
One step forward; three steps back.
Since then, the only substantive legislation offered has been that from our Senator from Georgia, Johnny Isakson. His proposal doubles the tax credit, eliminates the loan provision, and makes the credit available to all home buyers. who are purchasing standing, vacant inventory. The Senate, eager to pick up a few Republican votes, approved some version of the proposal. We’ll just have to wait and see what the conference bill looks like.
I continue to be concerned, however, because the President and the majority party in Congress both believe that only government and its spending of dollars (of which it does not have) will reverse the trend of the last eight years of mismanaged economic policy.
Unfortunately, the last eight years involved spending an additional FIVE trillion dollars that we did not have… and look where we are, now. We have a national debt of over TEN trillion dollars… and a President and Congress eager to start programs that will add several more trillion to the total.
The one thing we do need right now is an improvement in consumer confidence – and I don’t see that happening anytime soon. The big government types are using this crisis as a way to expand government, and according to the polls – the public is well-aware of it.
Consumers vote with their wallets – and many are simply scared to spend any money. The two-year Presidential election cycle with the complicit media helped to drive down the economy… and what started out as a snowball rolling downhill became an avalanche of epic proportion. When you tell the American people that we are in the worst economy since the Great Depression for not just months – but years – you shouldn’t be surprised if it becomes a self-fulfilling prophecy.
It is my hope that our leaders will come to the understanding that without a housing recovery – there will be no economic recovery. It is the single largest asset that most people own – and when you allow that asset to become a liability, you’ve shaken the very foundation of our economy.
I don’t know if Sen. Isakson’s proposal will be enough to stabilize the housing market – but I believe it’s a good start.
As always, if you have any questions regarding real estate in the greater Atlanta area, feel free to contact me here.
Call it groundhog gone high tech. Georgia’s resident weather prognosticating rodent, Gen. Beauregard Lee, on Monday sent text messages via Twitter as he prepared to exit his lair at the Yellow River Game Ranch and pronounce to the waiting crowd whether there would be six more weeks of winter.
“A crowd gathering outside my house,” Gen. Lee “twittered” at 6:45 a.m.
The groundhog was joined this year by the Gwinnett Braves’ mascot, “Chopper,” who the game ranch referred to as Beau’s “much more athletic cousin.”
As the time for his annual forecast drew closer, Beau twittered, “I have been eating more organically lately, but I think I smell grits!” A few minutes later, he added, “no, it’s hash browns.”
At 7:26, Beau posted on the social networking site that there were “lots of people yelling outside; must be time.”
Meanwhile, 560 miles to the north, Beau’s Yankee counterpart, Punxsutawney Phil took a moment to declare the Pittsburgh Steelers world champions, then saw his shadow and forecast six more weeks of winter.
Just moments after Phil’s forecast, Georgia’s groundhog emerged under cloudy skies, failed to see his shadow and promised that spring would be just around the corner.
As always, if you have any questions regarding real estate in the greater Atlanta area, feel free to contact me here.
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