Can You See the Savings?

If you’ve considered changing your light bulbs to energy-saving LED bulbs but decided not to make the investment because the prices were too high, you might want to investigate again.  The prices have come down considerably.

An initial investment now will generate immediate returns through energy costs and because they last longer, you won’t need to replace them for years.

The life of LED bulbs is projected to be from 35,000 to 50,000 hours compared to an incandescent bulb at 750 to 2,000 hours.  For normal home use, a LED bulb could last more than 20 years.

80-90% of the energy used by fluorescent and incandescent bulbs is wasted by the heat generated.  In contrast, cool LED bulbs converts 80% of the electrical energy to light energy.

• The color of LED lights is bright white, more like daylight, instead of the warm yellow of incandescent or the greenish tint of fluorescent bulbs.

• LEDs light up instantly instead of building to their intensity like some of the fluorescent bulbs.

• LEDs are more durable because they don’t have filaments or thin-glass bulbs like incandescent and fluorescent bulbs.

Shop around to find the best price on LEDs. If the LED only lasted 20,000 hours, you might have to purchase 20 incandescent bulbs during that same period of time.  Using the chart below, you can see that the LED uses about 10% of the wattage without compromising on the brightness.

The Perfect Last Minute Gift

It’s part of holiday tradition to celebrate with family and friends and to share gifts with our loved ones.  There’s no measuring how much is spent on the combined effort and money to find the perfect gift. 

The challenge is to identify the right gift in the right color and size; something they really want and need; and something that won’t break the budget. 

“Eight Gifts That Do Not Cost a Cent” are suggestions that have been offered on numerous Internet sites attributed to an anonymous writer.  They may be just what you need to find the perfect gift. 

• THE GIFT OF LISTENING...but you must really listen. No interrupting; no daydreaming; no planning your response; just listening.

• THE GIFT OF AFFECTION...be generous with appropriate hugs, kisses, pats on the back and handholds.  Let these small actions demonstrate the love you have for family and friends.

• THE GIFT OF LAUGHTER...clip cartoons and share articles and funny stories.  Your gift will say “I love to laugh with you."

• THE GIFT OF A WRITTEN NOTE...it can be a simple "thanks for the help" note or a full letter.  A brief, handwritten note may be remembered for a lifetime and may even change a life.

• THE GIFT OF A COMPLIMENT...a simple and sincere, "you look great in red" or "you did a super job" or "that was a wonderful meal" can make someone's day.

• THE GIFT OF A FAVOR... go out of your way every day to do something kind.

• THE GIFT OF SOLITUDE...there are times when a person wants nothing more than to be left alone.  Be sensitive to those times and give the gift of solitude to others.

• THE GIFT OF A CHEERFUL DISPOSITION...the easiest way to feel good is to extend a kind word to someone.  It’s really not that hard to say, Hello or Thank You. 

Up to $500 for Doing Home "Work"

The energy-efficient home upgrades tax credit is scheduled to expire on December 31st this year.  If you need to make improvements to your home, this could be an incentive to do it before the end of the year.  If you have already made qualifying improvements without realizing the tax credit is available, it may seem like a holiday gift you weren't expecting.

The equipment must be installed to qualify for the credit which can put you under a time crunch.  Heating and cooling systems, insulation, windows, doors, skylights, water heaters and home weatherization may qualify.

The Residential Energy Efficiency Tax Credit has been available for purchases since January 1, 2011.  The tax credit is 10% of up to $5,000 of qualifying improvements which would make a maximum of $500 tax credit.

The cumulative maximum amount of tax credit that can be claimed by a taxpayer in the different years this law has been in effect is $500.  If it has been claimed in previous years, the taxpayer is not eligible for this credit for additional new purchases.

For more information, see energy.gov or talk to your tax professional.

Winter Maintenance

With a 2,000+ mile long winter storm affecting much of the country, there are plenty of home owners who wish they were better prepared.  Even when you live in warm climates, some of these things are important to check periodically.

Preparing for the change of seasons can make your home more comfortable and protect your investment.  Regular maintenance extends the various components of a home and can generate savings in operating costs while avoiding expensive replacements.

• Weather strips around doors and windows should be checked for possible air leaks.
• Caulking around windows and doors should seal out moisture and air leaks.
• HVAC should be inspected and serviced by a professional annually.
• Smoke and carbon monoxide detectors should be tested regularly.
• Ductwork and supply lines from water heaters should be insulated.
• Fireplace chimneys should be cleaned regularly and fireplaces should be inspected for cracks in mortar and to see if the damper closes properly.
• Gutters should be free of leaves and debris to prevent rainwater build-up.
• Tree branches touching or hanging over your roof should be trimmed.

Please contact us if you need a service provider recommendation.

Pearland Has Flying Roaches and Lots of Spiders

"Entomophobia" is what I suffer from.  According to Wikipedia, it is also known as "insectophobia," or the irrational fear of bugs.  All bugs - I hate 'em!  Now you know.  Here's what Wikipedia has to say about it:  

"The symptoms associated with this phobia are similar to the symptoms manifested with many other irrational fears. An entomophobic is likely to experience enough anxiety upon viewing or otherwise coming into contact with an insect that he or she experiences a full-blown series of panic attacks. With extreme cases, the individual may lose consciousness for a short period of time. Uncontrollable weeping or a strong desire to flee from the area are also common signs that indicate an individual is suffering with this particular phobia."

Although I've never wept uncontrollably, last night after a wonderful dinner at one of my favorite new restaurants in Pearland, the inevitable happened:  a HUGE flying roach appeared behind my chair.  

Roaches exist.  And a huge flying roach is not an indicator of an unclean restaurant nor of (what would Marvin Zindler have said??) . . . "failure to control pests and ROdents."  [emphasis added by Marvin's voice inflection]  (Boy, I miss him!)  But, I digress……..

It grossed me out to add this pic!

So why did this big bad boy have to fly up behind me and stir my irrational fears?  I immediately left the table and went outside, only to learn that the culprit for this flying rodent is a large tree just outside the door of the place.  Those flying roaches LOVE to nest in big trees.  

It made me remember my last house in The Heights on Columbia which had a HUGE tree in the front yard.  When I first moved in, I discovered that it had a hidden nest of flying roaches who dive-bombed me every time I went in and out.  Thanks to my friend James Stuart (Stuart's Pest Control), they didn't last after he came over and fully douched the tree with poison.  

After my family teased me and humiliated me in the parking lot with fake bug jokes, all of our irrational bug fears began to surface.  And my son-in-law, Travis, gained a new perspective on his wife's inherited phobia!  But also, all of our bug stories came out.

Be sure to ask Rachel about getting a roach in her ear!  If you want to know about my days inspecting homes for the VA where I was stung repeatedly on my forehead, I'll tell you that one, too.  Or about the countless spiders-in-the-bathtub.  On and on our bug stories go.  I hope you'll share yours!  Or am I the only one?

It's comforting to have a name for it -- entomophobia.  Irrational, maybe.  But you can keep the flying roaches for yourself.

Motivated Sellers, Better Prices and Less Competition

The Winter Home Buyer Report conducted in the second week of November by REALTOR.com^® revealed the sentiments of current home buyers expecting to buy a house during the winter months.  It appears that there is pent-up demand with buyers who were unable to purchase a home recently.

Most cited as an impediment to purchase was the challenge of low inventory.  Strong demand coupled with short supply explains why home prices have been increasing.

"This summer and spring home buying season was particularly challenging for buyers, especially first-time home buyers trying to compete with all-cash offers and bidding wars because of reduced inventory.  In fact, a quarter of the winter home buyers revealed they are in the market now because they were unable to find a home during this last home buying season," said Alison Schwartz, vice president of corporate communications at REALTOR.com^®.  "While buyers are still experiencing challenges with inventory and approximately one in five buyers plan to put down all cash, there are advantages to looking for a home in the winter. Motivated sellers, better prices and less competition between buyers are some of the top reasons winter home buyers are interested in purchasing a home during the colder months of the year."

Some interesting statistics taken from the report are:

Biggest challenges when searching for a home during winter:

• 34 percent shared that there is not enough inventory on the market
• 29 percent believe that winter weather makes house hunting unpleasant 

Traditionally, the industry has found that the fourth quarter of the year has a lower sales volume and is generally attributed to distractions from the holidays and not wanting to make a move during consistently inclement weather.  Even in areas that are not affected by extreme winter weather, there seems to be a mindset about moving in the winter.

Indications are that it may be advantageous for sellers to put their home on the market now rather than wait until after the first of the year.

Why I live in Pearland and Sell Homes in Houston

When the internet first came around, I was already working in Pearland with my dear friend Mary Star, who took pity on me and gave me a chance at her successful office.  I had just been to Barbara McCarver's office, and she flat turned me down, stating that "Clear Lake already had enough Realtors."  I was down and out.

But let me back up. I had had an ERA franchise in The Heights in partnership with my mother, who had a brain aneurysm in 1986 and subsequently died in 1988 without ever regaining full consciousness.  My daughter, Katie, was born during that time, and my (then) wife, Rachel and I ventured into the gourmet coffee business with 4 other partners.  That was fun, but we went broke.  We went so broke that our cars were repossessed, and we struggled to pay the light bills.  I took a part-time teaching job at San Jacinto College (South Campus) and tried to run the coffee shop and build my appraisal business.  We kept going deeper and deeper in the hole.

Since I'd made many friends while teaching, I decided that -- in order to survive -- I needed to get away from the coffee shop in The Heights, so I ventured down south near San Jac to find a real estate position.

I slowly started building my business, but then the IRS started chasing me, trying to levy my commissions.  By this time, my wife and I had split up, though we didn't have money to file for a divorce.

What saved us was owning real estate.  We sold our two houses, got some cash, traded in our beat-up clunker cars that we'd been forced to drive since our new cars were repossessed, and went and bought ourselves two new Geos -- me a 4-door, Rachel a 2-door.  We found a house in Southdown using my now "infamous" "Absentee Owner Marketing Plan" with an owner who agreed to finance it to us with no money down.  Even though we were no longer together, we ALL moved in together to save funds.

Imagine, 1325 square feet -- two exes, their new partners, daughter, and now my real estate business since I had to skate the IRS's levy until I could get them paid off!  My father had had a stroke, and my step-mother calls and says, "I'm taking a cruise . . . and I'm dropping your dad off with you for a week while I'm gone!"  There we all were . . . happy home, happy work, happy dad, happy daughter -- all in 1325 square feet in Southdown.  It's comical now; it wasn't then.

So, I "put blinders on" and pulled a Scarlett O'Hara, "with God as my witness, I shall never be this way again!"  And "focus" became my mission.  And I became "Pearland Sam."  And while I still sell tons of Pearland Real Estate and stay #1 in Pearland . . . the majority of my business is back in Houston where I'm from.  But I love my Pearland Home . . . and I love my Houston RE/MAX office (RE/MAX Top Realty, Beltway 8 @ 288).  And I'm no longer in danger of losing my vehicles, thanks to God and guts.

There are morals to this story:  (1) focus is the key to success; (2) you CAN do it with time; and (3) Tomorrow IS another day!

xoxo  Happy Holidays!!  -Sam Ferreri

Thanksgiving is Always in Season

Most school children would probably say that Thanksgiving dates back to the Pilgrims at Plymouth as early as 1621. By the late 1660’s, it had become traditional to hold a harvest festival in New England.

President George Washington declared the first nation-wide thanksgiving in 1789 “as a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many and signal favours of Almighty God.”

One hundred fifty years ago during the Civil War, in October, 1863, President Abraham Lincoln proclaimed the first national day of Thanksgiving.

William Seward, Lincoln’s secretary of state, drafted the proclamation: “No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God…they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People.”

Even though the country was in the middle of the costly Civil War, the people of America started an enduring tradition to give thanks. In 1941, Congress determined that Thanksgiving will be celebrated on the fourth Thursday in November.

 

There IS a Magic Pill -- And I've Found it!!!

Everyone always wonders about the proverbial "magic pill."  And it seems all new real estate agents are looking for it . . . that "one" thing that will make a budding new agent a success!  They oft get discouraged by others who tell them that "there is no such thing as a magic pill," just like there's no Santa Claus?  :-(

You're probably thinking, "what on earth is Ferreri up to now?"  Well, let me back up.  There are actually LOTS of magic pills.

In the 1980's, I had many of my friends die of AIDS before anyone knew what caused it.  Did you know that in the early days of AIDS that we (as Realtors) were discouraged from listing/selling homes where occupants were known to have AIDS?  Could you get it from the house?  No disclosure laws were in place.  Thankfully, that changed at some point, but buyers and agents were still somewhat nervous about it.  

But then, some "magic pills" surfaced that, if taken regularly, would change AIDS forever from a "terminal" illness to a "chronic" illness.  That meant that if you took your magic pills, you could continue to live.  It was clearly your choice to live or die . . . and the magic pills were the difference.

In the early years, the side effects of the magic pills were unpleasant, but that, too, changed over time.  I recollect one of my dear friends -- an actor in The Alley's resident company -- refused his pills.  He didn't like the side effects.  He died.  It was his choice, though I miss him terribly, especially at Christmas when The Alley produces an annual version of "A Christmas Carol."  My friend was in it each year playing the character, "Tupper."  I haven't been back to see it since he died.  

There are more "magic pills."  Most people know I've been waiting for a kidney transplant for two years without being on dialysis.  How?  My magic pills!  I swallow (at least) 23 pills per day -- 14 of them are huge powdery pills that sometimes make me cough up smoke after I swallow them.   These sustain my life and kidney function until I can get a replacement, and my regularity with taking them has kept me off of a machine.  (I sometimes get some pills that have a warning label that says, "if you begin to vomit coffee grinds, see a doctor immediately."  Really?  That have to tell me that?  Surely, if I start vomiting coffee grinds I'll call the doctor.  Or, as a minimum, think, "OK, old man, you're drinking from the filter again instead of from the pot . . . get it right or pay the price!")  But I digress.

So, when I compare that to new real estate agents, I can quickly see which ones choose the pills and which ones avoid the side effects.  It's obvious that those who move outside their comfort zone and actually do the lead generating work that we show them, have great success.  The others who sit and think that the work is hard and that they can't do it, end up not having such successes.  The magic pills?  Nike says it best:  "Just do it!"  

See?  I found it!  The Magic Pills for Realtors!  "Do the work."  Do it and not only survive, but thrive.  And if not?  Well, I heard JC Penney is hiring seasonal workers.  

Refinance to Remove a Person

Most people are familiar with the various reasons a homeowner refinances their home which generally result in two major benefits: saving interest and building equity. 

There is however another reason to refinance which may not be as common which is to remove a person from the loan. In the case of a divorce, when one party wants to keep the home and the other party wants their equity out of the home, it is possible for the remaining party to refinance the home. If the equity is sufficient to justify it and the remaining owner can qualify for the new loan, the refinance can provide the proceeds to buy out the other spouse.

Refinancing to remove a person from the loan could also involve a situation where two or more heirs jointly own a property and have differing opinions on when to sell. The same situation could apply to a rental property with multiple owners and the refinance would provide a way to buy out a partner.

Sometimes, it’s not about taking cash out of the home to buy out the other party. If a person’s name is on the mortgage, they’re responsible if it goes to default. One party may be willing to deed the home to the other party but it doesn’t necessarily relieve them of the liability of the mortgage they originated.

Many times, once a person has made their mind to move on, they’ll take the fastest and easiest way out. Removing a person from the deed or a mortgage is a reason to consider obtaining legal advice to protect your interests. Refinance Analysis calculator.

Reasons to Refinance

1. Lower the rate
2. Shorten the term
3. Take cash out of the equity
4. Combine loans
5. Remove a person from a loan

Who's Paying Your Mortgage?

As a homeowner, you obviously pay for your mortgage but as an investor, your tenant does.  Equity build-up is a significant benefit of mortgaged rental property.  As the investor collects rent and pays expenses, the principal amount of the loan is reduced which increases the equity in the property.  Over time, the tenant pays for the property to the benefit of the investor.

Equity build-up occurs with normal amortization as the loan is paid down.  It can be accelerated by making additional contributions to the principal each month along with the normal payment.  Some investors consider this a good use of the cash flows because interest rates on savings accounts and certificates of deposits are much lower than their mortgage rate.

In the example below, is a hypothetical rental with a purchase price of $125,000 with 80% loan-to-value mortgage at 4.5% for 30 years compared to a 3.5% for 15 years.  The acquisition costs were estimated at $3,000, the monthly rent is estimated at $1,250 and $4,800 for operating expenses. 

Notice that both properties have a positive cash flow before tax.  The cash on cash return is the revenue less expenses including debt service divided by the initial investment to acquire the property.  The 15 year mortgage will obviously have a smaller cash flow and lower cash on cash but the equity build-up is significantly higher.

If the goal of the investor is to pay off the property to provide the highest possible cash flow at a later date, a shorter term mortgage with a lower interest rate will help them achieve that.  A simple definition of an investment is to put away today so you’ll have more tomorrow.  Sacrificing cash flow now, during an investor’s earning years, is a reasonable expectation to provide more cash flow in the future when it might be needed more.

Contact me if you’d like to explore rental property opportunities.

Real Estate 411

When you’re buying or selling, the obvious source to get your real estate question answered is your agent but where do you go the rest of the time?  As a homeowner for many years to come, you’ll need reliable help and solid suggestions.

Our business goal is to have a select group of our friends and past customers who consider us their lifelong real estate professional. We want to earn that trusted position so they’ll enthusiastically refer their friends to us.  Our plan to achieve this is simply to help these people with all of their real estate needs not just when they buy or sell but for all the years in between.

Throughout the year, we offer reminders and suggestions by email and social media that benefit your homeowner experience.  When we find good articles to help you be a better homeowner, we’ll pass them along.  You’ll discover new ways to maintain your property, minimize expenses and manage debt and risk.

We want to be your “Go-To” person for everything to do with real estate.  If we don’t have the answer you need, we’ll point you in the right direction to find it.

We’re here for you and your friends…now and in the future.  Please let us know how we can help you.

Waiting for a Kidney

It's been two years now on the transplant "list," leaving my phone on 24/7, waiting for "the call."  Early on, I had nearly 50 friends and family members get screened for a "live" kidney donation, yet all were denied for one reason or another.  I'd get a call that "so-in-so" is a "match!"  Eureka, I'll get a kidney! Only to discover, upon further testing, that there's a problem here and there.  The "highs" and "lows" of that game nearly did me in.  Finally, I told the hospital, "do not call me unless there's a kidney ready to be transplanted to me."  There's been no call.  But I've retained my sanity!

I'm listed in Houston and San Antonio, having been through two complete evaluations and having been "listed" by two major kidney transplant areas.   One day, I know I'll get one . . . but the waiting game is dreadful.  My earliest mentor used to say, "do what you fear most and you control fear."  Well, my greatest fear is dialysis.  Now you know, there it is.  I know many people who've lived great lives on dialysis for many years!  Most are miserable.  I decided -- if that comes -- to control my misery, to turn that lemon into lemonade.  And so I'm blessed....no machine.

I also struggled with "what happens to my business if something goes wrong with a kidney transplant or dialysis?"  And so, I began one of the greatest accomplishments of my near 39-year real estate career  -- turning my "job" as a Realtor into a "business" that can run without me.  I did not want to leave my daughter with the unthinkable task of scrapping my team business that I've worked so hard to build. And I looked for ways to make the business manageable without me.  I even created a position for myself in case I was only incapacitated, and had to remain at home for an extended period of time.  This is another blessing.  I wonder how many Realtors' businesses would be sustainable if they had to check out for an extended period?  I don't know many whose would be.  And so, I've begun studying what to do with a successful real estate practice when it's time to retire . . . and found that most clientele are left to fend for themselves!  And you know what?  It doesn't have to be like that!

I remodeled my house and built a "man-cave," hidden from the primary parts of the house, where I could work at a computer, look at the lake, and hook up to any machine necessary without others having to dole out pity upon my poor old rendered carcass (at least not in plain sight).

And so I've planned my post-kidney transplant goals -- to help other Realtors create, grow, and develop their businesses into future sustainable profit centers for the generations that follow them.  As David Scott, one of my current mentors, says, "people have lived before you."  (Which implies that they will live after you, too.)

And now, I've moved up the list.  I expect next year some time . . . I just pray it's before a machine becomes a necessity.  So far, so good.

And one last thing:  become an organ donor -- live or otherwise.  Get online at www.OrganDonor.gov NOW.  Sign up.  Register.  If you'd like to be considered as a kidney donor in Houston, visit my blog, www.MyKidneysSuck.com for details.  Thank you for doing the right thing.

(PS:  I've been signed up as an organ donor since I was 17 years old.  Who knew that I'd later be a recipient on a list?)

Why Borrowers Pay Different Rates

Lenders, like any business, have to make a profit.  The cost of acquiring the funds, the operating costs to service and the expected profit margin are easily identified.  The variable in pricing is the type of mortgage and the credit worthiness of the borrower. 

A loan with a 3.5% down payment is riskier than a loan with 20% down payment.  If the lender has to take the property back to recover their expense, the margin is greater between what is owed and what the property is worth on an 80% mortgage. 

Credit scoring is a risk-based pricing method that allows a lender to be competitive in the market for the best loans from different borrower groups.  Individual lenders set their own levels for what they consider “A” credit which is reserved for the best rates.  If good credit is approximately 710 to 740, scores below that are considered higher risk and will have higher rates.

Risk must be assessed for both the borrower and the property that collateralizes the loan.  The borrower’s credit history and income stability are strongly evaluated by the lender but if a default should occur, the property must secure the loan to avoid a loss to the lender. 

The challenge for some buyers is they are unaware of what their credit score is and how it will affect the interest rate offered by the lender.  It is to the buyer’s advantage to be pre-approved by a reputable lender prior to starting the process of looking for a home.  In some cases, the lender can actually improve the borrower’s credit score to help them qualify for a lower interest rate.

Contact me for a recommendation of a trusted mortgage professional - samf@remax.net

Lower Anxieties/Improve Marketability

One of the anxiety highpoints during the sale of a home is waiting for the buyer’s home inspection report.  Most sellers willingly disclose what they know about their home to any potential buyers.  The concern stems from the inspector finding something that they’re totally unaware of and that it will either cost them a lot of money to correct or the buyer will simply use it to void the contract.

If the inspection does reveal some unknown problem with the home, it’s probably as big a surprise to the buyer who is not as emotionally or financially invested as the seller.  It is human nature to fear what you don’t understand and when a report identifies defects, they may simply opt-out of the home.

The solution to the situation may be for the seller to have the home inspected prior to putting it on the market.  There is still a risk of becoming surprised by an unknown defect which at that point, would have to be disclosed to potential buyers or repaired by the seller.  The advantage is that it creates a baseline to compare discrepancies that may arise when a future buyer has the home inspected.

If the seller’s inspection report is made available during the marketing process, it could give buyers a sense of confidence about the home even though they may still choose to have the home checked by their own inspector.

The cost of the inspection, possibly $500, keeps some sellers from taking this initiative when selling their home.  In an effort to minimize their expenses, they forego getting valuable, disinterested 3rd party advice that could help sell their home.  On a $175,000 home, the fee for the inspection will probably be less than 3/10 of one percent of the sales price.

Another option to the seller to increase marketability of the property and bolster buyer confidence in the home would be to offer a home protection plan.  Generally, the seller doesn’t incur cost for this coverage until the home is sold and there may even be some coverage for the seller during the listing period.  The benefit to the buyer is avoiding unanticipated expenses for specific items that are covered during their first year of ownership.

Contact me for recommendations of home inspectors or home protection plans.

Rating Your Best Friend

Man’s best friend enjoys many of the benefits of his master’s home besides food and shelter and a comfortable place to live and play.  In return, dog owners expect companionship and possibly, protection; after all, even a small dog can bark to signal intruders.

Few people doubt that most dog owners love their pets and treat them well.  The costs associated with having a dog can include medical and dental that rivals human expenses, premium food, toys, grooming and license fees.  However, one of the expenses not anticipated by pet owners is a higher homeowner’s insurance premium.

There are almost five million dog bites a year with children being the main victims.

“Dog bites accounted for more than one-third of all homeowner’s insurance liability claim dollars paid out in 2012, which amounted to more than $489 million,” said Peter Robertson, representing the Property Casualty Insurers Association of America, testifying against the bill at a hearing of the Committee on Financial Services.  He said, “The total cost of dog bite claims increased by more than 51 percent between 2003 and 2012.”  It is now estimated that dog bites cause losses of over one billion dollars a year.

Some insurance underwriters have denied or canceled coverage or increased the premium of the owner’s liability insurance based on the homeowners’ specific breed of dog such as Pit Bulls, Dobermans, Akitas, Mastiffs, Malamutes and even German Shepherds.  The aggressive nature of certain types of dogs combined with specific training or lack of training, abuse or neglect are identified by insurer’s refusal to provide liability coverage.

If you are considering what insurers identify as a high-risk pet, you might want to visit with your insurance agent prior to acquiring your new best friend to see if it affects your rates.

Don't Do It!

You’ve seen lists telling buyers what to do to find the right home but knowing what not to do can be just as important.  After finding the right home, negotiating a contract, making a loan application and inspections, buyers, understandably, start making plans to move and put their personal touches on the home.

In today’s tenuous lending environment, little things can derail the process which isn’t over until the papers are signed at settlement and funds distributed to the seller. Verifications are made by a lender at the beginning of the loan process to determine if the buyer qualifies for the mortgage. The verifications are usually done again just prior to the closing to determine if there have been any material changes to the borrower’s credit or income that might disqualify them.

Simply stated:

1. Don’t make any new major purchases that could affect your debt-to-income ratio
2. Don’t apply, co-sign or add any new credit
3. Don’t quit your job or change jobs
4. Don’t change banks
5. Don’t open new credit accounts
6. Don’t close or consolidate credit card accounts without advice from your lender
7. Don’t buy things for your new home until after you close
8. Don’t talk to the seller without your agent

Your real estate professional and lender are working together to get you into your new home. It’s understandable to be excited about one of the biggest decisions you’ll make and that you feel you need to be getting ready for the move.

Planning is smart but don’t do anything that would affect your credit or income while you’re waiting to sign the final papers at settlement.

Equity Dynamics

Equity is the difference in what your home is worth and what you owe. Ideally, as the value goes up and the unpaid balance goes down with each amortized payment made, the equity grows from two directions.

This dynamic leads to increasing a person’s net worth much faster than many other investments.

A homeowner has minimal control over value. It is necessary to maintain the property to avoid depreciation and make good decisions on capital improvements. After that, appreciation is generally controlled by supply and demand and the economy.

Mortgage management is something that the homeowner does have control. Making the decision to select a shorter term mortgage at a lower interest rate can have an impact on equity build-up. Lower interest rates amortize faster than higher interest rates which will also affect equity growth. Currently, it is possible to get a 1% lower rate on a 15 year mortgage than a 30 year mortgage.

Compare two alternatives of a 30-year and a 15-year mortgage. The payments will definitely be higher on the shorter term because it pays off quicker. However, if a person can afford the higher payments of $362.53 more per month in this example, the equity will be greater. Even after you take into consideration the higher payments, the increased equity is $17,236 at the end of the seven year holding period.

Another decision that can affect equity build-up is making additional principal contributions along with the regular payments. Whether you’re making an occasional lump sum payment toward principal or regular monthly contributions, it will save interest, build equity and shorten the term on a fixed rate mortgage. Estimate your personal savings with this Equity Accelerator.

Equity Dynamics

Equity is the difference in what your home is worth and what you owe. Ideally, as the value goes up and the unpaid balance goes down with each amortized payment made, the equity grows from two directions.

This dynamic leads to increasing a person’s net worth much faster than many other investments.

A homeowner has minimal control over value. It is necessary to maintain the property to avoid depreciation and make good decisions on capital improvements. After that, appreciation is generally controlled by supply and demand and the economy.

Mortgage management is something that the homeowner does have control. Making the decision to select a shorter term mortgage at a lower interest rate can have an impact on equity build-up. Lower interest rates amortize faster than higher interest rates which will also affect equity growth. Currently, it is possible to get a 1% lower rate on a 15 year mortgage than a 30 year mortgage.

Compare two alternatives of a 30-year and a 15-year mortgage. The payments will definitely be higher on the shorter term because it pays off quicker. However, if a person can afford the higher payments of $362.53 more per month in this example, the equity will be greater. Even after you take into consideration the higher payments, the increased equity is $17,236 at the end of the seven year holding period.

Another decision that can affect equity build-up is making additional principal contributions along with the regular payments. Whether you’re making an occasional lump sum payment toward principal or regular monthly contributions, it will save interest, build equity and shorten the term on a fixed rate mortgage. Estimate your personal savings with this Equity Accelerator.

Who is my agent?

More often than you’d expect, homeowners refer to the person they bought their insurance from as their agent. It sounds reasonable but it’s definitely not accurate. That person is the agent of the insurance company and they legally represent the company, not the customer. Even an independent agent who can place a policy with different companies is still an agent of the company.

A mortgage officer, in most cases is an employee and represents the company. And the same is true for a title or escrow officer. It’s important to understand the actual relationship to know what you can expect from them.

Any business person who wants to stay in business must treat their customers fairly and with a high degree of service. As a customer, you should be able to reasonably expect honesty and accountability. The difference is that employees owe their loyalty to their employer and agents owe their loyalty to their principal.

An agent owes more than just honesty and accountability. The principal can expect complete disclosure, obedience, loyalty, reasonable skill and care and confidentiality from their agent.

This advocacy is very beneficial during the buying or selling process to coordinate all aspects of the transaction. The agent can bring valuable experience to your side of the transaction to provide confidence that your best interests are being represented from start to finish.

Most states have a recognized procedure for the real estate professional to create a formal relationship between themselves and a buyer or seller. This requires a fiduciary/statutory responsibility that places the principals’ interests above the agent’s own personal interests.

Mortgage Interest Deduction

Originally, in 1913 with the Sixteenth Amendment, Income Tax allowed a deduction on any interest paid by a taxpayer. Prior to World War I, most interest was paid for business purposes and very little paid by individuals. Credit cards, revolving credit, student loans and home equity loans that would charge interest would not become popular for decades.

However, by the 1930’s, the Federal Housing Authority was created to help people to finance homes. Later, other quasi-governmental agencies like FNMA, FHLMC and GNMA were created to help facilitate mortgage lending. 

Even though, Congress never intended to use this deduction to encourage homeownership, it has certainly benefitted millions of people who couldn’t pay cash for their home. This deduction has made owning a home more affordable for tens of millions of people.

The Tax Reform Act of 1986 eliminated the deduction of interest on most personal debt with the exception of qualified mortgage interest debt. Two new terms were introduced to specify what was qualified.

Acquisition Debt is the amount of debt incurred, up to a maximum of $1,000,000, to buy, build or improve a principal residence or second home. It must be a recorded lien and the amount cannot be increased by refinancing. In other words, the acquisition debt is a dynamic amount that decreases as the loan amortizes.

Home Equity Debt is any amount up to a total of $100,000 over Acquisition Debt. It must also be a recorded lien against either the first or second home. It can be used for any purpose and is no longer restricted to medical or educational purposes.

In the example below, a person borrowed money to buy a home and the entire first mortgage was acquisition debt. The unpaid balance was reduced by the payments made and the acquisition debt followed accordingly. At some point in the future, after the home had gone up in value considerably, the owner refinanced a much larger amount.

The existing acquisition debt was transferred into the new mortgage. Any borrowed funds that were used for capital improvements could be added to the existing acquisition basis. The interest on those funds would be deductible.

The owner/borrower could also deduct the interest on up to a maximum of $100,000 of home equity debt. If there was still debt above the acquisition and home equity debt, it would be classified as personal debt and the interest on it would not be deductible.  

 

 

 

 

 

 

 

 

 

 

 

Lenders are not concerned if they are making a tax deductible mortgage on a home. They want to make sure there is sufficient equity in the property to secure the mortgage should it have to be foreclosed. A homeowner should consult with their tax professional if there is a question about deducting the interest on their mortgage.

Click Here to use a Refinancing Analysis.

The Rules

The profit potential in single family homes for investment has been a consistently good long-term investment. They offer investors the opportunity of high loan-to-value mortgages at fixed interest rates for 30 years on appreciating assets, tax advantages and reasonable control that other investments don’t offer.

Last year, Warren Buffett said that if he had a way of buying a couple hundred thousand single-family homes, he would load up on them. Blackstone group L.P. (BX) has now purchased over 30,000 homes and American Homes 4 Rent (AMH) has more than 19,000 for rental purposes.

Individual investors actually have an advantage over the institutional investor but if they are not familiar with rental real estate, some basic rules could be very helpful.

1. Invest now to get more in the future. 
   Whether it is time, effort or money, the prudent investor is willing to forego immediate gratification for something more at a later date.
2. Real estate is an IDEAL investment. 
   IDEAL is an acronym that stands for income, depreciation, equity build-up, appreciation and leverage. 
3. Invest in single family homes in predominantly owner-occupied neighborhoods at or below average price range. 
   This strategy should involve homes that will increase in value, rent well and appeal to an owner-occupant in the future who will pay a higher price than an investor.
4. Location, location, location. 
   The same homes in different areas will not behave the same. You can improve the condition, modify the terms or adjust the price but the location can’t be changed.
5. Understand your strategy – buy and sell, buy and hold or buy, rent and hold. 
   These three distinct strategies involve big differences in acquisition, management and taxation.
6. Know where your profit is coming from before you invest. 
   The four contributors to profit are cash flow, appreciation, amortization and tax savings. They don’t contribute equally or the same in all investments.
7. Profit starts with purchase. 
   Buying the property below market value builds profit into the investment initially.
8. Risk is directly proportionate to the reward involved. 
   An investment that has a high degree of upside also will have considerable downside possible.
9. Avoid functional obsolescence unless you have a plan before you buy. 
   The lack of usefulness or desirability of a home that exists when you buy it will still be there when you sell it. Unless it can be cured, it will affect future profit.
10. Good property + good tenant + good management = great investment.
    These are three solid components for a successful investment.
11. Problems left unresolved have a tendency to get worse. 
    It is generally cheaper in time or money to fix a problem earlier rather than later.

If you’d like more information about the opportunities in our market, contact me.

Find the "Right" Agent Before the "Right" Home

It’s a common practice for buyers to make a list of what they want in a home during the search process and to explain it to their agent. However, maybe the first list they should make would have the skills they want their agent to have.

The Profile of Home Buyers and Sellers identifies what buyers want most from their agents and as you’d expect, help with finding the right home was ranked highest most often. While it is important, it may not be the most unique of the desired area of expertise.

Equally essential to the success of the transaction are the combination of help with price and terms negotiations and assistance with the paperwork, comparable sales, qualifying and financing.

To summarize the responses in the survey, Buyers want help from their agents with two things: to find the right home and to get it at the right price and terms. Some agents are actually better equipped with tools and acquired knowledge to assist buyers with financial advice and negotiations.

Since an owner’s cost of housing is dependent on the price paid for the home and financing, a real estate professional skilled in these specialized areas can be invaluable in finding the “right” home. An agent’s experience and connections to allied professionals and service providers is irreplaceable.

Ask the agent representing you to specifically list the tools and talent they have to address these areas.

A Home is More Than an Address

A home is a place to call your own, raise your family, share with your friends and feel safe and secure. It is also one of the largest investments most people have.

Leverage is the ability to control a larger asset with a smaller amount of cash through the use of borrowed funds. It has been described as using other people’s money to increase your yield and it applies to homeowners and investors alike. Positive leverage causes the yield to increase as the loan-to-value increases. 

Even a modest amount of appreciation combined with the amortization of a loan can cause a substantial rate of return on the down payment and closing costs.

Homes build equity as the price goes up due to appreciation and the unpaid balance goes down due to amortization. 

 

 

 

 

 

 

The example above indicates the yield on a home considering 3% acquisition costs on the home with a 4.5% mortgage rate and the resulting equity at the end of five years. The different down payments will affect the yield based on the leverage effect. 

Whether you rent or buy the home you live in, you pay for what you occupy. The question a person is faced with is whether they are going to buy it for themselves or their landlord. Take a look at the cost of Renting vs. Owning.

Get Regular Check-ups

Following his heart surgery last week, after an issue was discovered during his annual physical, President George W. Bush encouraged everyone to get regular check-ups. 

Another important checkup that should be done on a regular basis and can be just as beneficial for your finances is an annual homeowner advisory. Why would you treat your investment in your home with less care than you treat your car or even your HVAC system?

Consider investigating the following:

• Know the value of your home by obtaining a list of comparable sales in your immediate area as well as what is currently on the market for sale.

• Have you compared your assessed value for tax purposes to the fair market value in order to possibly reduce your property taxes?

• Even if you’ve refinanced in the last two years, can you save money and recapture the cost of refinancing in the time you plan to remain in your home?

• Have you considered reducing your mortgage debt with low-earning cash reserves that will not be needed in the near future?

• Have you considered investing in rental homes in good neighborhoods to increase your yields and avoid the volatility of the stock market?

• Recommendations of repairmen and other service providers from a trusted source who deals with them more frequently than you do.

Our goal is to create a lifelong relationship to help you be better homeowners. We want to be your “go to” person whenever you have a real estate question. We want to help you not only when you buy and sell but all of the years in between.

We want to provide good, consumer-based information about homeownership on a regular basis through email and social networking. If it benefits you by helping you be a better homeowner, hopefully, you’ll consider us your real estate professional for life.

Anytime you or your friends need help, please call. Knowing where to get the answer is just as important as knowing the answer. If you’d like information on any of the items we suggested, please let us know.

Does anybody really know what they want?

Do you "want" to be a millionaire?

I've been hosting some "focus groups" -- small 3-4 person groups with the "focus" being on becoming better Realtors.  The first question I pose to the group is simply, "what is it that you want in life?"  In other words, "what are your life aspirations?"

While this is the most important first step toward personal and professional growth, it is interesting to note that most people haven't really thought about it.  I mean, really, really thought about it!  And yet, you must know what you want in order to get it.

I think that most of us think about something we want, do what it takes to get it, then forget to want something else!  Thus, we reach this "status quo" level that begins to falter and not deliver what we thought we'd get.  (Uh-oh, now you're thinking "Hmmmm......the old bird is getting deep here.")  Maybe I am.  But I realized it's time for ME to rethink what I want so that I can move on to the next level.

As I've discussed "life aspirations" with these groups, I began to realize that everyone wants "financial independence," but can't really define it . . . or the definitions vary considerably.  So, let me share what I learned it to be from a man whose name I can't remember; however, his first name was Ken and he was one of the owners of the ERA Regional Office in Houston in 1980, partners with Dale Climer.  That's where I first met Helen Perry who now owns a real estate school.  (Helen, what was Ken's last name???)  You may remember that I opened an ERA franchise in 1981 . . . as did Jim Keenan, Joe Rothchild, Patty McCracken, and several other "old" friends who are still around in the business today!

But I'm digressing again . . . so here's how Ken simply defined "financial independence:"  have enough money in the bank in cash to pay for 6 months' expenses without earning a nickel.  Ok, sounds simple enough, so I made a goal out of it later in life.  The hard part is knowing how much your monthly expenses actually are!  (Do you?  Are they written down?  Do you live by what you have, or what you budget?)  There's 3 questions for you.  I realized, in my focus group, that this is going to take some work.

I will say that I operate my life in "financial independence."  And Ken's model got tested a few years ago after Hurricane Ike.  Remember when houses simply couldn't sell because of all the hurricane damage?  My 6 months' expenses were spent down to month 5!  Then, through hard work and determination, income began to grow again and the stockpile was replenished.  I call this stockpile my nut . . . and like a squirrel, I store my nuts for the winter months!

I also found that many (if not most) people want "to get rich."  But unless that is dollarized and defined, it just won't happen.  Wanting money won't get it.  Notice that "financial independence" requires a very specific number (which varies for everyone).

To "get rich," you must have a vision of what those riches will do for you.  Buy a house?  Car?  Pay for college for your kids?  How much exactly is that?  

What is a "millionaire?"  You don't know, yet you want to be one?

What are YOUR life aspirations?  What do you REALLY want?

Where Is It Invested?

You’ve saved for a rainy day or retirement. Congratulations but don’t get too comfortable yet; where is it invested? It’s estimated that over 25% of Americans have their long-term savings in cash instead of investments like stocks, bonds or real estate.

The memories of the financial crisis of 2008 are recent enough to understand why some people may want to avoid the stock market and real estate. Even though Wall Street and housing have rebounded considerably, uncertain investors are sitting on their cash. However, trying to avoid a bad decision can have serious costs too.

If your money is not earning at least at the current inflation rate, you’re losing the purchasing power of your dollars. Bankrate.com estimates the average money-market deposit yields 0.11% and the average five-year certificate of deposit currently yields 0.78%.

Rents are continuing to rise and there is a shortage of good, affordable housing. Single family homes have a significant advantage over many other types of investments. They have high loan-to-value mortgages available at fixed interest rates for long-terms on appreciating assets with distinct tax advantages.

The cash flows are considered to be one of the most attractive features of rental properties. Some investors think of it as a growth stock that pays substantial dividends. In the example shown below, a $125,000 rental with an 80% loan-to-value mortgage at 5% that rents for $1,250 per month, has a positive cash flow before taxes of $3,000 a year.

The rate of return on rental property can be substantially higher than other investments while allowing the investor control that isn’t available in alternatives.

It Can't Hurt to Wait, Can It?

It’s been said that more money has been lost due to indecision than was ever lost because of a bad decision. Regardless of whether you agree with the statement, delaying the decision to buy in today’s market is going to cost the buyer more. 

Home prices have gone up considerably in almost every market in the country in the past year and while inventories are beginning to grow, prices are expected to continue to rise. Mortgage rates jumped 1% from the beginning of May to now. They could easily reach 5% by the end of the year and continue to rise in 2014.

Many of the financial experts in the country believe that the economy will not be strong until rates are in the 7% area.

The two components that move the cost of housing are price and mortgage rates. Escalation of either one will have an affect but when both are going up simultaneously, it is dramatic. It can literally eliminate buyers who could have purchased earlier.

The following example shows what would happen to the payments on a $200,000 home if the price were to go up 3% at the same time that the mortgage rates went up 1%. Not only would the payments go up by $150.81 per month, the price of the home would be $6,000 more. Even though the down payment may not change much, the new owner would have to borrow more money. By not acting, it is costing them more in price and payment. The loss of the appreciation would have been equity had they purchased prior to the rise in price.

 

 

 

 

 

 

 

 

 

Check out the Cost of Waiting to Buy to see what the effect will be using your own projections.

Today's Realtor has it "made" . . .

What we did before MLS!

My mother became a licensed real estate agent in 1961 and I grew up in a real estate office environment . . . but that's an old story.  You've already read it.  But as I prepare myself for an arbitration hearing on Monday -- based on the foundation of what MLS is/was -- I began to "reminisce" about the way we "used to do it."

Really, today's consumer has it made.  With HAR.com, REALTOR.com and REMAX.com (not to mention TheSamTeam.com), consumers can shop for homes on the internet 24/7.  This makes it much easier for them to "weed out" the homes they like and don't like.  But what did we do before the internet?

In the early days, an agent found out about another agent's listings by word-of-mouth or by telephone or flyer delivery.  However, there was no guarantee that the listing agent would share any fee with another subagent (there were no buyer agents back then).  The subagent would have to call the listing agent and ask permission to "co-op(erate)" in the sale of the listing for a fee.  The two would have to negotiate the fee split, and decide whether to work together or not.  Consequently, listing agents tended to sell most of their own listings.

Then along came the MLS with its "automatically assured" fee split.  Listing agents could submit their listings to a central MLS system who would make copies and disperse them on Fridays by delivery truck along with a copy of "pendings" and "solds" for the week.  It was out-of-date, but much better than nothing.  It still required a phone call to confirm.

This is what MLS Books looked like.  Often, the images got "mixed up" before printing!

Then, along came MLS books.  A listing agent would fill out a lengthy listing form, take a Polaroid black & white photo, and send all in to MLS with a check for $10 per listing.  Within two weeks, a giant-sized book of photos and listings would be distributed on Fridays.  In Houston, it was FOUR giant-sized books every Friday.  (Sold/comp books were distributed quarterly, for a small extra fee.)

Along came computers which revolutionized our business -- the first being little terminals with no screen that spit out wax paper listings -- miles and miles of wax paper!  Monochrome screens came in the 1990's and really changed things up again . . . gradually progressing to where we are today.

And to think that I had to file an arbitration claim to get a commission for one of our young agents because some mega-listing company (whose name I won't mention) decided that they don't have to play by the MLS rules.  I don't really think they understand where we came from, and what MLS really is.  But they're about to get a lesson.

If I list a home on MLS with a fee offer to a co-op agent, that fee cannot be modified.  Period.  Plain and simple.  No phone calls.  No negotiations.  The fee is unconditionally offered to any participating member of MLS.  They can't change it except with mutual agreement in writing before any offer is accepted.   They'll learn.

Ah well, when I think about the history of MLS and co-op(erating) with other agents, it brings back a lot of memories.  No answering machines, no cell phones, no pagers, carbon paper, no fax machines, no email.  When you left the office, you went home.  No business until the next day.  Is it better now?  Hmmm.........

If I'd Known...

We’ve probably all said or at least thought “if I knew then, what I know now, I would have done things differently.” We should have stayed in school longer. We should have listened to our parents. We should have bought Apple stock in 2002 for $8.50 that sells for $400 today. Or we could have bought gold in 2000 for under $300 for a four-fold profit today.

Years from now, if we look back at 2012, we may say that it was the best buyer’s market ever. Even now, in 2013, it’s apparent that both housing and mortgage prices are going up and they may never return to the record low levels.

The housing affordability index, which is considered to be good at 100, had increased to over 200 this past December, January and February. Shrinking inventories and rising prices in most markets have caused the index to fall to 172.7 for May 2013.

This market applies equally to acquiring a home to live in or a home to use as a rental. It is estimated that about 30% of the property purchased last year was done by investors. It is understandable because the positive cash flows far exceed most other investment alternatives.

Homeowners moving up in a rising market may sell their home for more by waiting but it will also cost them more for a new house. Typically, a person buys a 50% larger home when they move up. If they wait for prices to go up 10% on the $150,000 home they're selling, they’ll realize $15,000 more but will pay $22,500 more for the new home purchase. They’ll actually net $7,500 less by waiting for prices to go up and may have to pay a higher mortgage rate too.

The question homebuyers and investors alike are faced with today is whether they will be saying years from now that they seized or missed an opportunity of a lifetime.

So . . . You want to be a real estate agent . . .

Can you Get Rich Quick?

I have been a real estate agent for over 38 years (so far)!  And you probably know by reading past blogs that I (literally) grew up in a real estate office.  So all of my life (that I can remember), I've worked with Realtors and as a Realtor.  I hardly know anything else, except for the short time I worked for Der Weinerschnitzel (on Bellfort), Pizza Hut (in Conroe), and A Jiffy Key and Lock (on Reveille).  (Mother wanted to make sure I appreciated the real estate business by encouraging me to work elsewhere very briefly, all totaled less than one year.)

This is what the (der) Wienerschnitzel (where I worked) looked like.  The A-frame with drive-thru in the middle!

Now you know my entire work history . . . and you see why I'm a Realtor.  (My job at Der Weinerschnitzel, however, was my favorite, which paid me $1.40 per hour.  Of course, hot dogs were 18 cents at the time.........do I sound like your grandfather now sonny-boy?)  Anyway, I digress.

Part of my job as a "broker/owner" is "recruiter."  So I had a guy email me a few days ago saying, "hey Sam, maybe you remember me.  You sold my house a few years ago, and I was thinking about getting into the real estate business.  Can you point me to a good real estate school?"

So, I looked him up in my database and remembered him (somewhat).  We sold his house with no issues, which makes him less memorable than the difficult sales where I take a cussing......but that's irrelevant.  (I do, however, remember every cussing I've ever taken!  "Taking a cussing" is part of a good Realtor's job, because buyers and sellers are over-stressed during that period and tend to take out their frustrations on their agent.  Then, when it's over, I get an apology and a gift.  I'm used to it.)

Nonetheless, his sale was uneventful and thus, less-than-memorable.  But I pointed him to my recruiting website, www.BecomeATopAgent.com and to a path toward becoming a real estate agent.  Again, uneventful.

But yesterday, he called me.  He'd reviewed the information, and had this question:  "How much can I make with your firm in the next 60 days?"  Oh boy, I knew that I was about to "bust his bubble."  Unfortunately, most people think that real estate is a "job."  It's not!  It is starting your own business, true entrepreneurship.  Capitalism.  Free enterprise.  Very American.  And my favorites, "work your own hours," "be your own boss."  LOL!

Let me just say that the last 3 "brand new licensees" that I've met with didn't have the money to join the Board of Realtors and get MLS access!  But they wanted to make millions!  Where did this complete misconception come from?  Was it that they'd sold a house and saw the HUGE fee they'd paid and thought, "wow, this guy is getting rich?"  Maybe.

But make no mistake . . . hear ye, hear ye!  It will cost a new agent (after real estate school) $5,000-10,000 over the next 6 months with very little income.  Perhaps they'll get this money back in a year with a return, but expect a very rocky beginning.  It (seriously) takes 2-3 years to get well established so that your income becomes "regular" and static.  Though most agents in year two start to "roll," I wouldn't advise any new debt until year 3 or more.

Now . . . my competitors are going to look at this and say, "yes, but at our firm, you'll do much better much quicker."  HAHA!  Our primary competitor spends more money on recruiting gimmicks than they do on marketing.  And their agents make far less money than our agents do, even their top-producing agents with the most longevity.  So, if you're looking at becoming an agent, be sure to look at ALL the data!  And consider who's going to train you . . . who better than someone who's "made it" in this business?

I never lead someone down a path that looks rosier than it is.  The path to successful real estate agency is laden with thorns.........but my job is to trim those thorns and make the path as smooth as I can.  It's now part of what I do every day.

The plan?  I have one for you.  Invest in yourself -- both financially and educationally -- apply the basic principles of success -- join the best company you can find -- and you're on your way.  The reward at the end?  Yes, you can make a good living in time.

But my earliest mentor -- Tom Hopkins -- always said, "you don't get rich in real estate by listing and selling it . . . you get rich by owning it."  So as you make money, phase 2 of your plan is to invest in yourself again by buying real estate.

Questions?  Ready to jump right in?  Call me.  832-200-5656.  SamF@Remax.net  www.BecomeATopAgent.com

Retirement Without a Mortgage

Planning for retirement is obviously important and many times, an activity plagued by procrastination. Some people plan to have their home paid for by that magical date so they won’t have payments after they retire. It makes sense to eliminate a large recurring expense before they quit working.

One strategy would be to be make regular principal contributions in addition to the payments so that it will eliminate the debt by the target retirement date.

Let’s say that a homeowner refinanced their $200,000 mortgage at 4% last year with the first payment due on May 1, 2012. Under normal amortization, the home would be paid for at the end of the term; 30 years in this example.

By making additional principal contributions with each payment, it would accelerate the payoff on the home. An extra $250.00 a month would pay off the mortgage in 10 years. $524.55 extra with each payment would pay off the loan in 15 years; and $796.23 would pay off the loan in 12 years.

Having a home paid for at retirement has the obvious benefit of no house payment. It is also a substantial asset that could be borrowed against or sold if unanticipated events should occur.

Another strategy might involve purchasing a smaller home now to use as a rental that you intend to live when you retire; see Retirement Home Now.

To make some projections to pay off your own mortgage, use this Equity Accelerator.

 

Things everyone should learn from my mother . . .

. . . when working in an office

I literally grew up in a real estate office.  In 1961, my mother dropped my sister and I off at The Livingston Sands Motel, owned and run by Aunt Joni and Uncle Claud, while she drove to Austin to take her real estate exam (which she passed).  Interestingly, there was no availability to take the exam in Texas anywhere but Austin . . . and of course, no computers or calculators.

After she was licensed, she changed brokers a few times until she finally paired up with a lady named Mae Peden and in 1968, the opened "Peden Real Estate" at 6477 South Park Blvd. (now known as Martin Luther King Blvd.).  The office was a converted house, and the garage was enclosed to make more offices.  For air conditioning, they had window units and gas space heaters for the winter.  All was well.  In fact, mother actually lived in one of the bedrooms where my sister and I stayed from time-to-time, though we lived full time with my father.  (Those two took their bitterness with each other to the grave!)

Nonetheless, my sister didn't really have much interest in the inner-workings of the office, but I sure did!  I loved nothing more than the office machines (especially electric typewriters), answering telephones, taking messages, greeting customers, and everything there was about working in an office.

No surprise that at age 17, I obtained my real estate license, though by then, modernization had taken hold and I was able to take my real estate exam in Houston (by pencil and scantron).  It took two weeks to find out that I had passed!  Another interesting side-note is that no courses were required.  All I had to do was get certified as an adult with a simple legal procedure wherein I had my "disability of minority removed."  And since my father was living in a rooming house in Houston and my mother was living in the office, I was living with my step-mother in Conroe.....easy enough.

But here are some gems from working for an alpha-female (ie, my mother) that everyone should learn who works in an office:

1.  "On time" means 15 minutes early.  If your appointment is for 2pm, you show up at 1:45pm and wait.  If you show up at 1:55pm, you're late.

2.  "Telephone Messages" are crucial to your business.  Take the name, phone number, time that they called, any subject, write it all down including your name, date, and time, and IMMEDIATELY tape the message to the person's telephone.  Inaccuracies and tardy delivery are not tolerated.

3.  "Return your messages promptly."  If someone leaves you a message, you call them back immediately upon return.  No matter how badly you do not wish to speak to that person, you call them back promptly.

4.  "Put the trash out."  Do not let your trash can fill up . . . empty it promptly.  Wash your coffee cup.

5.  "Make sure your shoes are shined."

Were there more?  Ah yes, you bet, but these seem to jump out in my mind daily.  I still tend to these office duties with the same vigor as though Mother were still here . . . and she died in 1988.

So yes, I've really been working full time in real estate for 38 years (with license), but many more years in a real estate office.  And I can type like no one else I've ever known.

www.BecomeATopAgent.com . . . I still do it all today.  I'm going to go shine my shoes before work today . . . ahhhhhhhhh......

When Rates Go Up

Rising interest rates are great if you are renewing a certificate of deposit but not so much when you’re borrowing money. With interest rates on the rise as well as home prices, housing affordability is a concern for would-be homeowners.

A rough rule of thumb is that a person’s or family’s housing should not exceed 28% of their monthly gross income. While rental rates and home prices have been consistently increasing, mortgage rates have been soaring in the past month. In one week, according to the Freddie Mac Primary Mortgage Market Survey, they jumped by .5%.

This means that people have to pay a larger percentage of their income for housing unless their incomes have been increasing at an equal pace.  A $200,000 mortgage would be over $100 more per month if closed in July compared to closing at the interest rates available in January of 2013.

If rates increase by .5% by the time you close on the same size mortgage, payments would increase by almost $60 per month. In order to keep the payments the same, a borrower would have to put an additional $11,000 down to lower the mortgage amount. 

Check out how your payment would be affected if interest rates continue to rise.

The National Association of REALTORS® suggests that housing is more affordable now than one year ago. However, with all of the variables in play including inflation that was not addressed in this piece, it is unclear how long conditions will remain “affordable”. 

Hot Dog! It's the 4th of July!

So Here's How to Make the Best Hot Dog Experience

By Sam Ferreri  What could be more "American" than Hot Dogs?  Well, a lot of things, actually, because hot dogs were created in Frankfurt, Germany around the 13th century, and the terms "wiener" comes from Vienna, Austria . . . but who cares?  They're now as American as Apple Pie!

The Traeger Smoker

So when is a better time to eat them than the 4th of July?  This is it . . . this is your chance!  Las year, I purchased a Traeger Electric Smoker . . . and yum yum yum.  I discovered that there's absolutely no better way to prepare the tube steak (a/k/a the wiener) than to smoke it on the Traeger until it "busts" down one side!  I buy the "base model" Oscar Meyer hot dogs for this event.  

Of course, there are many options in hot dogs . . . fat dogs, skinny dogs, bun-length dogs, all-beef dogs, turkey dogs, chicken dogs . . . I really don't want to know what goes into any of them!  But they come out soooooo tasty!  I've recently had Lucky Dogs on Bourbon Street in N'awlins and Middle-Eastern Dogs? . . . on the streets of New York City.  (I call them Middle-Eastern Dogs because it seems that these hot dogs stands are run mostly by middle eastern guys who also offer shish-kabobs and a variety of other ethnic treats.)  

But NONE are better than my smoked dogs at home!  And now, a new discovery, thanks to Jose's Mom and Michelle:  Smoked Hot Dogs with Honduran Curtido.  OMGosh!  This is a little treat from heaven.

Empty jar + Full Jar of Jose's Mom's Delicious Honduran Curtido

One day, I had been invited to Jose's mom's house for a Honduran dinner where I noticed this huge jar of "stuff" in purple juice.  I asked Jose what it was, and he turned up his nose and said, "oh that's my mom's curtido."  To which I asked, "what is it?  Can I try some?"  "Sure, he said, have at it."

Jose and his sister clearly do not like it, but it was very intriguing to me.  So . . . one bite, and I was HOOKED!  This "stuff" is delicious!  From what I can discern, it consists of red cabbage, red onions, jalapeños, vinegar, and south-of-the-border spices.  And it goes on EVERYTHING!

Michelle came over, tasted it, and remarked how good it would be on hot dogs . . . so we smoked some . . . and she was right!  There's no better hot dog combination that we've found yet!  So . . . 4th of July . . . . . we've got fireworks ready!  Dogs and curtido ready!  Let Freedom Ring!

Hot dog and wine party anyone???  How do you like YOUR dogs?

Is Home Staging a Viable Business On its own?

Or will you go broke trying?

On this rare occurrence, I was invited to dinner by someone who only knows "of" me, but whom I'd never met.  She's a very smart neighbor of a client of mine, and for the sake of this blog and her anonymity, I'll call her "Betty."

Betty wrote to me and said that although a practicing CPA, she'd found her true love in life -- decorating.  And although she's nearing becoming a partner in a large firm, she really wants to find a way to make a living doing what she loves.  So she thought of "home staging" for home sellers/Realtors to help get homes sold.  So she offered to buy my dinner to "pick my brain" for what I know about the business.

So last night, we went to BJ's -- the place with homemade beers?  Over a nice stuffed baked potato, salad, and a Nit-Wit -- the beer du jour -- I got chatty.

Home staging in Pearland real estate has been around for about 10 years.  During that time, one local interior decorator has commanded many of the top producers' business and charges a very reasonable fee to spend about an hour helping home sellers stage their home.

I "used to use" her on The Sam Team, too, until my bill approached the multi-thousand-dollar-per-month level, and I realized I could hire someone full time and get more out of them.  So I discovered one of my newer teammates had a skilled eye for decorating and de-cluttering -- skills that are totally required for most home stagings.  So, I put him and my photographer together to form my "Stage 'n Shoot" crew, and it is one of the best  combinations in the marketplace today.

So this lady wanted my advice about a career change . . . but I only gave her the information she needs to make a good decision . . . would I do it?  To give up a near-partnership CPA practice to take a certain giant pay reduction to "follow my bliss?"  Hmmm.......

Would YOU?