Tips For Real Estate Agents on Social Media
Businesses can’t ignore social media if they want to remain relevant and competitive in today’s busy online marketplace and the real estate business is Read more...
Tips For Real Estate Agents on Social Media
Businesses can’t ignore social media if they want to remain relevant and competitive in today’s busy online marketplace and the real estate business is no exception. Social media platforms like Facebook and Instagram can be powerful outlets that help real estate professionals position themselves as industry experts while connecting with their audience and building confidence in their experience and services.
I practice what I preach. Our real estate school has had a Twitter account since early 2009 and a Facebook page for almost as long. Even our original YouTube channel has had content since 2009. That’s 10+ years of going hard on all these platforms.
So how do you win considering that more and more content is being added each and every second to Twitter, Facebook/IG and YouTube? It is getting more and more difficult to get noticed.
The key to getting the most out of your social media presence is utilizing tactics that help you build stronger connections with your audience and inspire them to work with you. Below, I’ve put together my top 4 social media tips for real estate agents, particularly in the residential space as I figure most of our real estate school students are going to start there.
1. Educate your buyers on the market.
Buying or selling a home is a major life decision for most people, and they want to know that they are working with a Realtor that can guide them through the process and answer all their questions as they move through the process. The best way to build this confidence with your audience is by educating them about the real estate market.
In addition to sharing educational articles from your own blog, curate some content from reputable, third-party sources to help your audience understand important parts of the buying and selling process. In addition, you can post your own honest tips and advice to your social media pages based on the questions that you are most often asked by new buyers or sellers.
2. Share information on a particular neighborhood.
When promoting your listings (or those of your company) on social media, go beyond just sharing the features of the homes you are selling. Most homebuyers want to know more about the neighborhood or surrounding areas. Real estate professionals can use their social media channels to educate buyers on the benefits and unique characteristics of local neighborhoods to help them make a more informed decision about where they want to buy.
In addition to sharing your own content about the neighborhoods you sell in, share content from local organization pages. For instance, you might link to an event calendar from the city’s Facebook page or share a tweet from a local restaurant. This is especially true in areas like Downtown Los Angeles or coastal Orange County where the nightlife and social aspects of the community are a lure for buyers.
3. Start a conversation.
The social aspect of social media is often forgotten when professionals use social media channels for marketing. However, if you really want to get to know your audience and build trust, it’s vital that you chat with your fans and followers. Get active in the comments section of your social media posts and pay attention to what others are saying on your pages.
With the instantaneous nature of social media, most users expect an instant response to their questions or concerns. In addition to being active in the comments section, you’ll need to be diligent about checking for and responding to direct messages across platforms. When someone reaches out with a question or concern, make sure that you are available to answer these questions and get them the help they need when they need it.
4. Don’t forget video!
Many real estate professionals will skip video content when it comes to managing their social media pages. However, with the visual nature of home buying, it’s important that real estate agents utilize video to showcase their properties when possible.
Most people reading this article have a television broadcasting system in their purse or pocket with their iPhone or Android device. It’s easy to quickly do a live on Instagram or post a quick story to your page. Just get out there and start. I posted a video of all of my equipment here, but I didn’t start with this much stuff. All I had back in 2009 was one camera with an internal microphone and just started recording videos on HD cassettes. I always knew video was going to be huge across the Internet and would be a valuable marketing tool. The faster you can start engaging with an audience the faster you can monetize.
Video content also helps create an emotional connection with viewers in a way that images alone cannot. Providing a video tour of a property allows the real estate agent to give their audience a better idea of what it is like to experience this home instead of seeing the space out of context.
If you are interested in taking real estate classes online or in one of our classrooms, please call us at 888 768 5285 or visit www.adhischools.com.
Love,
Kartik
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Before the question of whether or not open houses actually “work” is answered we should probably define what the word “work” actually means.
If you are a real estate agent and believe that a Read more...
Before the question of whether or not open houses actually “work” is answered we should probably define what the word “work” actually means.
If you are a real estate agent and believe that a successful open house is one where the agent found a buyer for that property on the day of that open house then very few open houses actually “work”.
However, if you define a successful open house as a chance to network with neighbors in a particular farm area, an opportunity to show the owners that you are doing something that is almost expected, and a way to find buyer clients for other homes, then nearly every open house has the potential to be a success.
Like many things in business, a substantial amount of time and effort is necessary to ensure that an open house will attract the right kind of traffic and result in at least a few interested and qualified potential buyers. Sometimes, sadly, even with a high traffic count, the net result might be less than satisfying.
While it’s also true that on occasion, "the buyer" will walk into an open house and make it all seem easy, if not preordained - but this can sometimes be attributed to pure chance.
Folks who are not quite ready to buy immediately frequently visit open houses as a way to solidify their preferences and explore the market. An open house can be the best way for an agent to meet people "up close and personal," demonstrate market knowledge, hand out cards, and take names. You never know when you're going to meet a buyer. It's best to always be prepared.
How to Do a Successful Open House
Use all the tools available to you to stand out from the crowd. You don't have to spend big bucks on advertising, or on refreshments. Use technology to your advantage.
Here are some ideas:
• Livestream the Open House on Facebook, Instagram and YouTube:
Give quick snippets of information as you walk through the rooms. Talk about the neighborhood, the easy commute to downtown, the community pool, the schools or a nearby shopping mall. Show the house at the same time.
• Invite the neighbors:
Count them as your allies to "sell" the good points about the area, rather than as "tire-kickers."
• Consider Unconventional Hours:
If the home has spectacular sunset views, schedule the open house for late afternoon. Or, alternatively, be slightly ahead of the normal 1-3 or 2-4 schedule, and offer coffee or fresh-squeezed orange juice. If you are going to serve alcohol at an open house, other rules can apply. Proceed with caution. I did a video and an article on this as indicated by the prior link.
• Creativity Counts:
Employ an iPad as a digital sign-in sheet and encourage visitors to ask questions. Get back to them via email with specific answers. You'll boost your chances of developing new relationships.
Perhaps most importantly, be there for everyone who walks through the front door. Meet and greet every visitor with a smile and a card. Never simply sit behind a desk or on a kitchen stool. But, be sure to give visitors a chance to walk through the house at their own speed and in their own way.
View an open house as an opportunity to sell yourself as well as the property and then every open house is, indeed, totally worth it!
If you are interested in online real estate school or even classroom oriented real estate courses, call us at 888 768 5285 or visit www.adhischools.com
Love,
Kartik
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With hundreds of thousands of real estate salespeople in California alone, clients have choices. The million dollar question is “On what basis will the client decide?” This can be a hard thing to predict, Read more...
With hundreds of thousands of real estate salespeople in California alone, clients have choices. The million dollar question is “On what basis will the client decide?” This can be a hard thing to predict, especially If there are two real estate salespeople that are equally competent, have similar experiences and both work for reputable companies - the client might make a decision on who to hire based on pure “likability”.
If one agent is more “likable” than another who do you predict will get the business? It’s not hard to assume that the agent that can win the heart and mind (in that order) of the client is going to get the contract signed.
Because clients are often concerned or nervous through the real estate process, the agent should strive to be the kind of salesperson that brings good energy and enthusiasm into every presentation they go on. It has long been said that sales is simply the "transfer of energy from the salesperson to the customer”. The more energy and enthusiasm you exude, the more likely the client will sign.
Still, there are some real estate salespeople that are the personification of negativity and create roadblocks through the sales process. We have all met people like this. You know the type - they walk into a room and all the plants begin to die and when they exit they spring back to life.
I would urge all of our readers to examine which of these describe them. Are you the kind of person that brings vibrance and energy to every interaction or are you the exact opposite? When you walk into a room is there a big grey rain cloud over your head?
If you aren’t sure how to answer this, have a look at people that you would characterize as being in each of the two groups. Positive and energetic or negative and draining?
Consider the group of people that you know. Think of five or ten people that you know who are real energizers. You probably can think of a few right off the bat. Who do you know that when they show up, when they call the energy is better because of their presence? Who are the few people that you know when they walk into the room the energy shifts to the “dark side”?
Believe me. People notice.
This is important because your likability impacts how much business you're able to do.
So what are some things that we can do to immediately increase likability? The first thing I would urge is to be interested in other people. If you have ever read the classic book How to Win Friends and Influence People by Dale Carnegie a recurring theme is to try and make other people feel special by being interested in them and their story. It’s pretty simple - be interested. Be interested in other people and who they are and what they are about.
People that are interested in others are infinitely more likable than those that are not.
In a nutshell: Try harder to be interested than be interesting.
Another thing to increase that “L” factor is to always leave people better than you found them. In the case of real estate, that could be a critical market update to a buyer or seller. It could be an escrow update to one of your current deals but always look to add value at each and every interaction.
There’s plenty of pessimism in this environment - you don’t need to look hard to find it. Be the person that's optimistic and lights up a room each and every time they are in it. Not only will this be better for your physical health, it’ll be better for your wallet.
If you are interested in real estate classes in Los Angeles or online real estate school call us at 888 768 5285.
Love,
Kartik
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Errors can happen on a credit report. What causes these errors? Sometimes it can be something as simple as a father and a son who have the same name and the only difference is a “Sr.” or “Jr.” Read more...
Errors can happen on a credit report. What causes these errors? Sometimes it can be something as simple as a father and a son who have the same name and the only difference is a “Sr.” or “Jr.” What if son paid a few bills late and this incorrectly appears on Dad’s credit report?
Worse than the above scenario is a customer who may have been the victim of identity theft. Perhaps their social security number and date of birth were compromised on a website and sold to criminals. Each year we read of many major corporations who have had their databases compromised. Equifax, eBay and JP Morgan Chase are just a few examples of large corporations that have been targeted by hackers. Where then does a customer turn?
The Federal Trade Commission has several recommendations for those that genuinely believe that false and erroneous information appears on their credit report. The Fair Credit Reporting Act mandates that the credit bureau and creditor have a collective responsibility to correct and update any incorrect information in the customer’s credit report.
The individual with erroneous information on their credit report should send correspondence to the credit bureau that has displayed this erroneous information. This could be either Experian, Transunion, or Equifax or could potentially be all three. Mail correspondence isn’t required, however, as the individual can file their dispute online.
If the customer is sending their dispute via mail, the Federal Trade Commission has a sample dispute letter available on their website and this letter can act as a starting point for anyone seeking to eliminate inaccurate information from their credit profile.
In order to increase the chances of incorrect and incomplete information being deleted from the credit report individuals are encouraged to support the claim with any proof that the data is incorrect. Examples of this proof could be cancelled checks or bank statements showing that the bills were paid on time or the fact that the debt is no longer even valid. In some cases, the customer might have paid off the debt and it is still reporting as open on the credit report. Combining the letter or online dispute with substantiation that the information is inaccurate will increase the chances of having incorrect information deleted from the credit report.
The FTC recommends that this substantiating documentation not just be sent to the credit bureau but also to the creditor with whom the customer is disputing the incorrect information. This may increase the chances of incorrect information being deleted from the credit file. If this doesn’t work the customer is able to leave a note in their credit file next to the “incorrect” trade line stating that the customer disputes the accuracy of this information.
Generally, the credit reporting agency must investigate the disputed items within 30 days of the dispute being filed. However, the law has an exception for the credit agencies wherein they don’t have to investigate a dispute that they deem to be frivolous. in the event that a credit bureau is going to investigate a disputed item, they are required to forward everything received from the customer over to the creditor.
Once the investigation is complete, the bureaus are required to give the customer notification of the outcome of the dispute in writing. They are also required to provide a copy of the credit report to the customer in the event that the dispute resulted in a change to their credit report. Statute also requires that the credit bureau provide one copy of a credit report to everyone for free each and every year. A customer who is disputing information on their credit report that results in a copy of their credit file being sent to them will still be allowed their one free credit report per year. What this means is that a customer who is disputing credit information in their file may end up with multiple credit reports per year at no charge.
Because credit scoring can affect so many aspects of a person’s life, the government has a system in place to ensure that incorrect information on a report can be disputed and ultimately deleted. Hope is not lost in the event of identity theft or an incorrectly reported late payment. There is a dispute process in place and will work if done properly. The Federal Trade Commission’s sample dispute letter can be a great place to start.
As always, if you are considering getting into our great real estate business, you'll need to go to real estate school first. Need help passing the real estate exam? Check out our test prep site here.
Love,
Kartik
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So you’ve finished up at our real estate school and passed the real estate exam. You're stoked because you have your first buyer client but their credit is less than perfect. The buyer badly wants a Read more...
So you’ve finished up at our real estate school and passed the real estate exam. You're stoked because you have your first buyer client but their credit is less than perfect. The buyer badly wants a home and you’re asking yourself: What advice can I give them to improve their credit score?
The reality is that credit scores today have a profound impact on quality of life. It determines the rates you pay on all sorts of things from mortgage interest rates to whether or not you can rent a car. The difference between good credit and bad credit can also determine where and how you live.
Make sure that only accurate information appears on the credit report
It makes sense that a borrower would want to be sure that their credit report contains accurate information. Any inaccurate data can be disputed with the credit bureaus. Equifax, Experian and TransUnion are the three bureaus and can be contacted to dispute erroneous information.
If your borrower isn’t sure how to start the dispute process there are third party providers that can help quarterback this with the credit agencies. I would recommend checking online or with other folks in the business that can give you a good referral to a vendor that can help.
Pay down revolving debt
Assuming that all the data on the credit report is accurate, the next question is “What else can we do to bump up the score?” One thing that can quickly impact the FICO is to advise the borrower to pay down as much revolving debt as possible. This is known as the “credit utilization” ratio. This ratio is a big deal as it accounts for about a third of the FICO algorithm. The less credit you have available the worse your score will generally be.
In other words if all your credit cards are maxed out, your score is probably going to be low. Do your best to get credit card debt paid down quickly to improve the credit utilization ratio and get that score up.
Try to get added as an authorized user
Another thing that can help bump the credit score is if the borrower can convince a family member or a loved one to add them to one of their credit cards. If mom or dad has a credit card that has a solid payment history and they are willing to add the borrower as an authorized user, this can help piggyback their on-time payments to boost the score.
Make sure bills are paid on-time
A central aspect of good credit is ensuring that the borrower pay their bills on-time. An easy way to do this is to calendar all required payments on a cell phone or Google calendar. Better yet - back up the calendaring with autopay. Autopay eliminates the aspect of human error and also eliminates wasted money spent on a bunch of late fees. Better still - auto pay eliminates the worst case scenario of an altogether missed payment. One missed payment means a catch-up scenario for the borrower and forces them to make two or more payments at once. Letting bills pile up can make it really hard to dig out of a deep hole.
Think long-term with your buyers
Remember that selling real estate inherently involves a very long sales cycle. Even if your prospect can’t buy a property immediately, they may be able to with some future planning. A year is going to go by quicker than you might think. Do you plan on being in the business in 12 months? I would think so. Sticking with a prospect even when it looks like they might not be able to buy immediately will create loyalty and your deal will eventually come to fruition.
As a real estate professional, it’s important to be a valued resource for your clients. Giving great advice can help foster loyalty among your customer base. This can be priceless and irreplaceable.
As always, if you are interested in online real estate courses or even live classroom courses, call us at 888 768 5285 or visit www.adhischools.com.
Love,
Kartik
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OK – So you took our real estate classes in Los Angeles or maybe you took our real estate classes online. Now you have your license and it’s time to do your first open house! You’re hoping to make Read more...
OK – So you took our real estate classes in Los Angeles or maybe you took our real estate classes online. Now you have your license and it’s time to do your first open house! You’re hoping to make some great connections with potential clients and you want visitors to roam through the home a little longer. What do you do? Bribe them with ice cream? Booze? Both?
If you decide to serve alcohol at your open house and you don’t have a liquor license (no agent is going to have one) it’s important to ensure that the open house is not open to the public. If you are serving alcohol and your open house is open to the public you need to have a liquor license to do it.
Want to serve liquor at an open house? There are other rules too:
There can’t be any sale of alcohol
It’s important to make sure that there’s no actual sale of alcohol happening at the open house. Agents typically don’t charge for liquor at an open house so this isn’t something that most real estate agents have to worry about.
The premises cannot be maintained for the purpose of keeping, serving, consuming, or disposing alcoholic beverages.
If you’re doing an open house at a residential property, it’s pretty unlikely that the premises are going to be maintained for the purpose of serving liquor. It’s a residential property, it’s not zoned commercial, it’s not zoned retail restaurant or bar. So this second rule isn’t going to be a problem for most real estate agents.
The event should not be open to the “general public” at the time alcoholic beverages are served.
In the hospitality world, this is known as a “private party exception”. For the private party exception to be invoked, the person doing the open house has to have a list of guests prior to the event. Only people on the list are permitted to be admitted to the event and it would become a “private party”.
This means that if somebody does show up at your open house and they’re not on the list, you have to turn them away. If you’re serving alcohol and you let them in the event could be interpreted as being “open to the public” which could trigger a licensing requirement. The list of attendees is important to maintain and should be respected.
Finally, it’s hard to overstate the amount of liability that the agent can incur in the event the agent allows alcohol to be served to someone that is underage. Agents can also be liable in the event that they continue to serve alcohol to someone who is obviously intoxicated or is “habitual drunkard”.
So be smart about it. Make sure that if you are serving wine you need to have proper protocol that’s being followed to make sure we limit our liability at these open house events.
As always, if you are interested in taking real estate classes in Los Angeles or in Orange County please visit www.adhischools.com. Feel free to call the office at 888 768 5285.Love,
Kartik
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I recently received an email that went like this:
"Dear Kartik:
“I'm addicted to social media and I can't get over how successful all these real estate agents on Instagram seem to be. I see every Read more...
I recently received an email that went like this:
"Dear Kartik:
“I'm addicted to social media and I can't get over how successful all these real estate agents on Instagram seem to be. I see every other realtor on 'the Gram' closing what seems like an endless amount of real estate transactions and I can't seem to keep up. I've done eight deals so far this year and I compare myself to other realtors online and it seems like I'm doing so much worse than they are.
How do I break my addiction because I keep comparing myself to other people online?"
This is a very good question, actually. I think that a lot of people these days are addicted to their cell phones and specifically to social media. I mean, the addiction to our phones and technology has gotten so bad that the latest version of the iOS operating system actually has a screen timer showing the user how much time was spent on their phone.
Anyway, there was actually more to this email. The writer had actually listed a few agents that seemed to be doing really well on Instagram and I used a system called Broker Metrics to look up how many deals these agents had done. Turns out that he author of the email had actually done MORE deals than the agents that he was comparing himself to!
Now, I know that there's different ways that you can count how many deals you did. I understand that sometimes transactions can be co-listed or maybe you're on a team and the offer was written in the name of your "team leader" and you didn’t get credit through the MLS. I understand all that. But, it's important to remember that the things people put on Instagram or Facebook or Twitter are the most pleasant parts of their lives. Society picks and chooses what they want to share with the rest of the world. All these posts to is try and control your perception of their reality.
Remember to keep the following in perspective:
1. Much of society is addicted to technology. Particularly their cell phone.
2. A subset of that society is admittedly addicted to social media.
3. Not everything that you see on social media is real.
So, it's important that we stop comparing ourselves to people online because more than half of it is fake. So, go back to work. Focus on what makes you successful. Closing real estate transactions, helping clients, stacking cash and building a career. Forget what everybody else is doing online. You could spend your whole life on the sideline watching what other people are doing, or you can get in the game, play and win.
Love, Kartik
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How to Use Social Media to Get Real Estate Business
Social media is one of the most important ways to get business today. Most people are on their phones interacting in the digital world at least as Read more...
How to Use Social Media to Get Real Estate Business
Social media is one of the most important ways to get business today. Most people are on their phones interacting in the digital world at least as much as they are with the physical world. Nurturing relationships online through outlets like Facebook and Instagram can help build trust and brand recognition between you and a prospective client.
To better understand how people in the real estate business use social media I recently met with a good friend who works at a large mortgage company in Orange County. When I met with her for a recent interview she was working with an escrow company and helped build their business using the power of Instagram and Facebook. She was kind enough to share some insider tips on how she uses social media, specifically Instagram, to gain followers and new prospects.In this interview, I was able to find out three key things:
• What she posts
• When she posts
• How she decides what to post
Danielle Benevides has done a great job building this escrow company using Instagram. Here is the gist of our interview, which you can also watch in full here on my YouTube channel.The main takeaways from our interview are these strategies:
1. Merge your personal and professional accounts into one.
2. "Like" other people's posts and engage with them.
3. Reach out to your followers by sending them messages.
4. Post at times when people will be more engaged with social media, such as before work, during lunch, after work and before bed.
5. Post updates that present you as a productive and successful professional, such as you going to an open house, you meeting with clients, you selling a house and so on. Be personable and relatable through these posts.
6. Find an Instagram account in your field that you admire. What makes it so successful? Ask yourself are there models that you can copy before you start doing your own thing? It’s important to not blatantly rip off others and be authentic as you consider this strategy.
7. When you build a following, you can do more and gain an even bigger following. It’s easier to go from 15,000 followers to 20,000 followers than to go from 0 followers to 5,000. Scale is important.
How Danielle Benavides Uses Instagram to Gain Business
Danielle: "Basically, I'm very intentional with what I post on Instagram. I'm very intentional about who I add. It's all a very methodical process. Something I encourage agents to do is to merge their personal profile with their business one. So far, that's really worked to my benefit. By merging accounts, I'm exposing what I'm doing in my daily routine, such as being out with new clients, visiting an open house or doing anything related to business. I'm posting these things and people recognize it. I'm also liking other people's photos, which establishes an online relationship."
Kartik: "Some people think that the business page and personal page should be separate. You don't think so. Why?"
Danielle: "I think it should be all in one. It's time-consuming to go back and forth and log into different accounts ... I hear from agents that they don't even log into either their personal or business profile. When you're trying to juggle two accounts, you won't have the best results."
Kartik: "What about people who didn't grow up with technology or those who may think that social media isn't relevant to their business?"
Danielle: "I work with some clients who aren't really into social media. I encourage them to at least try it out because it is something that they should put into their business. Social media can be a huge part of their success."
Kartik: "What is a good engagement strategy for those who want to get started?"
Danielle: "What I have found myself doing is that I will purposely go on Instagram and start liking pictures of real estate agents that I follow. I even go into my search bar and find real estate agents I know. I seek them out and message them if I want to, like send a DM about my escrow services. You're not working that hard to send a message online. It cost me more gas and time to visit friends than to touch my phone and start sending messages."
Kartik: "A lot of people struggle about what content to post and when they should post it. What do you do?"
Danielle: "It's important to post at certain times of the day when people are more likely to look at their phones or check social media.
• Before 9 am: Lots people get to work between 7:30 and 9 am and check their social media with a cup of coffee.
• Noon during lunch.
• After 5 pm: Work is over and people have some downtime.
• Between 8 and 9 pm: The day is usually done and there's some wind-down time before bed.
Kartik: "What are your end goals with social media?"
Danielle: "My goal is to continue building my following and use it as a tool to get business. I also want to be a leader in my field. I want people to use me as an example, just like the people I look up to on Instagram. I try to follow their methods and implement them into my strategy."
Learn More About Real Estate and Social Media
Once you build an audience around yourself, you can monetize and build your brand even more. I'm so thankful to hear some expert tips from someone who has used Instagram for her business with real results.
If you’ve considered taking online real estate classes visit our website here. If you want to take real estate classes in Los Angeles or in Orange County we have you covered also! To learn more about using social media for real estate, subscribe to my YouTube channel here.
Love,
Kartik
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5 Things I Love About Home Ownership No matter what you’re selling a basic belief in it is critical. It’s hard to sell something that you yourself don’t see value in. I genuinely love real estate, Read more...
5 Things I Love About Home Ownership No matter what you’re selling a basic belief in it is critical. It’s hard to sell something that you yourself don’t see value in. I genuinely love real estate, and there are countless reasons why. Because of this, I have no problem talking about it with everyone I meet. However, for this blog, I’ll limit myself to just a few reasons.Here are five things I love about homeownership.1. Fixed PaymentsWhen you get a home loan with a fixed interest rate, you lock in your payment for the next 15 to 30 years. Your payment is locked – even if the world around you changes. This means your payment will stay the same even while the cost of living is guaranteed to increase over time. This predictable and stable payment will help you plan financially without the fear of increased living expenses.On the other hand, if you rent, your payments are virtually guaranteed to increase as demand and population increase.When you own your own home, your housing expenses are locked in, which only gives you more margin because you’re not continually paying more to live at the same property.2. Likely AppreciationOver time, the value of your home is likely going to increase. Just how much won’t be the same every year, but on average California real estate goes up 4 to 8 percent annually.In some years, values may rise more than 20 percent, and in bad years values can go down — but everything ultimately averages out to a steady rate of appreciation between 4 and 8 percent.Without any effort you’re going to get richer through appreciation.3. StabilityOwning a home gives you a measure of stability and certainty in your life. You also get more control over basic lifestyle decisions without having to ask a landlord for permission. Do you want to paint your walls? Go ahead! If you want a dog, you don’t need to ask your landlord or pay a pet deposit — after all, it’s your house.Also as I mentioned before, fixed payments provide a static housing expense that won’t go up with inflation. In an uncertain world, this is a good thing.4. Forced SavingsIt doesn’t matter if you’re frugal or not — owning a home forces an increase in net worth over time.Even if the value of the home never goes up, the mortgage balance is going down through the process of amortization. This forces you to build some level of net worth even if your property isn’t appreciating.In California, you’ll gain more equity by an ever-decreasing mortgage balance, which will give you access to funds in the future. If your home appreciates, so you’re getting richer on both ends — with both a decreasing balance and higher home value to give you more equity.
5. Your Home Is an AssetYour home and other real estate form part of your estate, which can be left behind for future generations. The fact that your house is passable to others helps leave behind a legacy and keep wealth within your family.As a renter you are getting value in that you have a place to live temporarily, but the big picture is that you are helping pay off your landlord’s mortgage with ever-increasing monthly payments.I understand that in some markets people have the position that it is cheaper on a monthly basis to pay rent compared to a mortgage and that (in theory) that difference could be reinvested elsewhere but the truth is that so few people actually do that. For most of us, if we have money in our pockets we tend to spend it.Learn How to Buy and Sell Homes in CaliforniaDo you want to take real estate classes and get into the exciting world of buying and selling homes? Are you ready to share the benefits of home ownership with others? Then find out more about real estate classes in Los Angeles or even online real estate school today!
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Are We in a Real Estate Bubble?
A topic of debate in our industry these days is whether or not we are in a real estate bubble. With supply still relatively low, housing starts that don’t keep pace Read more...
Are We in a Real Estate Bubble?
A topic of debate in our industry these days is whether or not we are in a real estate bubble. With supply still relatively low, housing starts that don’t keep pace with demand and prices inflated, my impression is yes.
What do you think?
First, I want to follow up on a video I recorded earlier this year. I reflected on a tour I did of some new construction where Lennar homes had built homes within homes – sort of like an in-law suite. I then discussed what I suspected to be a real estate bubble brewing, even back then.
Back to the Mini Homes
These mini houses were built because Lennar might have suspected that housing prices in California had become so unaffordable that buyers would actually need demised space inside their homes so buyers could have their parents, children or tenants rent out the smaller space to offset the mortgage payment. The builder might also have predicted that joint families are becoming more likely for a greater number of buyers.
I spoke of an affordable housing crisis that had to come to a head somehow. Read on for some California market statistics that have me concerned:
The Numbers Say It All
In San Francisco County, the median home price as of Feb 2018 was $1.73 million. There was a strong increase in appreciation in San Francisco county because in January 2018, the median home price was just $1.33 million.
I’m located in Southern California, so naturally, I was interested in local statistics too. As of March 2018, the median home price was $805,000, but in January 2018 the median price was $780,000.
Frankly, I’m a big believer that we are in a bubble. It’s no secret that many in the real estate business don’t want to admit that the economic environment for housing might be in bubble territory. But I’ve been saying that we’ve been in a bubble for the past year.
Why Are Prices Increasing?
Prices are always some interplay of supply and demand. Supply could be defined as the number of houses on the market at any given time and demand refers to the number of qualified buyers.
We have had constraint in supply for the last few years relative to demand. The number of houses on the market in most areas just isn’t enough to satisfy the demand. This has caused prices to increase and a reduction in marketing times. According to the California Association of Realtors the average time to sell a home in California has recently been as low as 18 days!
Low supply coupled with relatively high demand because of low interest rates and other factors have resulted in an extreme amount of appreciation. I believe that this isn’t sustainable and the market must balance out eventually.
Why the Correction Might Not Be as Extreme as the Previous Recession
Despite the fact that I am a believer in the law of entropy I’m fairly confident that the next real estate market correction is unlikely to be as pronounced as the 2008 crash. This is not to say that another correction might not be worse, but I predict that the upcoming one should be a softer landing. It’s no secret that underwriting standards are pretty conservative these days. People generally have to qualify for financing and submit a bunch of documents to prove their financial ability to repay. There aren’t as the same number of stated income and stated asset loans out there that precipitated the 2008/2009 crash.
What will happen and when? We can’t be sure. Maybe it will be an international geopolitical event, maybe a domestic event or something else significant that will cause the market correction. Maybe interest rates edging up will cause the market to shift.
I just know that these prices aren’t sustainable.
A Brief Update: July 2018
This blog was based on statistics I found in earlier in 2018. Current stats from the California Association of Realtors state that the median price for homes in San Francisco have decreased to $1,620,000 as of the time of this writing. However, this is still a 7.9 percent increase of what the median was in May 2017.
In Orange County, the median home price has risen to $838,000, which is a 5.4 percent increase from its value in May 2017.
In short, the numbers still support my theory that we’re in a bubble.
What Do You Think?
Leave a comment on my YouTube video on this topic here. I would love to know what you think. Do you think I’m right? Am I wrong? Do you think these prices are just the new normal?
If you are interested in real estate classes in Los Angeles or even an online real estate school, check out our website here.
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