How to Build an Interest Rate Cap into Your Offers

          

30 years ago, when I entered the real estate business, we used to see a clause, and I used to use this all the time myself, that we would build into offers.

And the clause said something to this effect:

"This offer is subject to the buyer qualifying for a loan and the home qualifying for a loan as noted in the offer terms. And you could say the loan type (conventional, FHA VA, whatever you're gonna do there) at an interest rate not to exceed X."

And that was the key part of that language. And I'm not suggesting you use that language exactly, that's something for you to talk about with your broker. But we would just have an interest rate cap built into our offers.

Now, some people would say, Well Jim, when I have my buyers get qualified, they generally lock themselves in. Not every buyer locks themselves in. A lot of buyers like to try to gamble and float it.

So when we build that language in, it gives the buyer an...

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The “Picky Inspection” Secret to Landing High-Quality Referrals (Even in this Market)

          

What is the picky inspection?

Now, for years we've been in a seller's market. And the last thing we wanted an inspector to do is to come in and kill the deal, right? But today the market is shifting towards buyers. And buyers are starting to gain more and more leverage in the marketplace.

So when I'm counseling my buyers, I might say, "You know, we wanna get an inspection. That's a fair inspection. But I'm kind of leaning towards advising my inspector to be a little bit more picky than they might have been in the past. Let me tell you why:

Because what we're doing when we do an inspection is really looking at health and safety issues and really big structural issues. You know, the roof is going bad, or there's a bad foundation, or something like that. The minor stuff, the things like just noting the age of a water heater and you know that there's a crack in the sidewalk and you know, the basic stuff, the cosmetic stuff is...

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This Script Instantly Makes Hesitant Buyers Ready to Buy

          

You're probably hearing a buyer say this to you. They're saying, "Hey, I wanna wait. Let's put a pin in this because I wanna wait and see what happens with the market."

Now if they say that to you, what's your response?

The language of sales matters. We're not trying to manipulate people or push people, but we wanna understand where they're coming from. And help them understand the market a little bit better.

So my response to that would be something like this:

I'd say, "Hey, I totally get it. I wanna move at your pace. I don't want you to feel rushed at all. But I do have a question for you because I wanna understand where you're coming from: What's the value in waiting?"

I'm gonna let them answer and they're gonna probably say that they think prices or maybe interest rates will come down. And my response to that would be:

"I totally understand. And if that's where you're at, I'm totally cool with that, as I said. But...

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The Weird Real Estate Secret to Fighting Inflation

          

Here's some good news about the real estate market, and we need some good news right now:

As of the second quarter of 2022, home ownership rates were rising. So that's good.

And we say, well, why would anyone not want to be a homeowner? Right? When we're in the real estate business, we think everybody should be a homeowner.

But sometimes, renters have a hard time getting over the hump of deciding if it is a good idea to become a homeowner. Especially when we're seeing interest rates rise. We've seen prices still rising in some markets by double digits.

One thing you can point to, which is really powerful, is the concept of inflation.

Everybody knows what inflation is and inflation is touching everybody. And so you can point out that, "Hey, you know, I'm sure you're aware that inflation right now is at a record high, a 40-year high. The last reading was 8.5% inflation. But what people don't realize is that rents are...

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5 Key Reasons Why It’s A Great Time To Buy A Home

       

Is it a good time to buy a house today?

It's an important question for us as REALTORS to be able to answer and really be passionate about it. This isn't just an answer we're giving because we wanna sell a house, but an answer that's actually backed up by real data.

That way, buyers will actually believe what we're saying and be influenced by what we're saying.

So here are 5 key reasons, backed up by data, why people should be excited about entering the market today:

1. Rents are rising quickly.

So if you're not a homeowner, what are you by default? In most cases, you're a renter. So latest reading shows that rents are up 14.8% compared to a year ago. And they're likely to continue to rise at a fast pace going forward.

2. Interest rates.

Interest rates have settled back down a little bit. They're not at the peaks anymore. So interest rates historically, when you look at the last five decades, have averaged 8%. Right now, we're in the high...

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The Deadly 16.9% Number Threatening Your Deals…

        

A number that we should be concerned with right now in the market is 16.1%.

So what does 16.1% represent?

It represents the number of transactions that were canceled last month. The last time we saw a number that high was at the beginning of COVID when buyers really didn't know what was gonna happen. March, April, when COVID really went into full effect in our country in 2020. That's when you saw this same level of cancellations. And that's what we're seeing again right now.

So how do we tighten down offers so that sellers have some clarity that they know they're gonna get to closing?

I'm gonna give you several things to think about. You might have a few more. But one of the things is getting the disclosure statement signed as quickly as you can.

Most states require a disclosure statement. This is where we're the seller's gonna disclose everything they know about the house to a buyer. But not waiting around, not delaying getting that...

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4 Bulletproof Reasons Buyers Should Buy A House in Today’s Market

        

Why should a buyer buy a home in today's market?

If we don't know the answer to that, then it's gonna be a struggle to talk to buyers about why they should buy. Because everybody thinks they should wait:

"Shouldn't I wait for prices to come down? Shouldn't I wait for interest rates to come down? Shouldn't I wait for the recession to kind of come and go?"

There's gonna be a lot of those mindsets. And we have to be able to answer the question: "Why should I buy now?" 

And really we have to sell ourselves first before we sell anyone else. So I'm gonna give you four reasons here that someone should consider buying now as opposed to waiting or not buying at all.

1. Some sellers are panicking.

Why are they panicking? Because they put their home on the market yesterday and they expected just to get overrun with buyers. Then maybe two or 3, 4, 5 days goes by and they still don't have multiple offers. They don't even have very many...

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Date The Rate, Marry The House

        

Date the rate. Marry the house.

Now, what does that mean? That means that if we went back in time to a year ago, the market was a completely different animal. Right?

A year ago, buyers that were in the marketplace were experiencing multiple offers on every listing. They were being asked to sign escalation clauses that would maybe sometimes mean they were paying 10, 20, 30, 40, 50, a hundred thousand dollars more than the list price. People are being asked to do appraisal waivers, inspection waivers, appraisal gap language, non-refundable earnest money.

It was an incredible time to be a buyer in what we might call a frenzy market.

Now, fast forward to today:

The market's undergoing a complete shift, right? And what that means is there's a lot more to choose from. There's a lot more listings on the market. List prices are coming down in a lot of price categories. We're seeing a lot fewer buyers in the market. So that means that the...

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Why 80% of Millionaires Come From Real Estate

       

I had a real estate coaching student come to me recently and asked me if she should invest her equity of her home into other real estate.

And it's a question she was getting from her clients as well.

So I explained this to her in a story form, so she could explain it to her clients as well.

So let's assume that you had $400,000 in equity in your home. And you leave $200,000 equity in your home and you pull $200,000 out.

Now, how do I pull it out? I refinance it or I get a HELOC loan for that $200,000.

So now I have $200,000. Of course, I'm paying interest on it. It's not free money. Let's assume I'm paying 5.5% interest today.

With that 5.5% interest, I now have to beat that rate of return in order to make money.

So let's assume then I go out and I take that $200,000 and I find an investment property. Maybe it's a duplex or a triplex, and I spent $700,000 on it.

That's reasonable because they gotta put 25% down generally on investment...

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The “Show, Not Tell” Strategy For Landing More Buyer Clients

       

One of my good friends told me about this incredible strategy that she's using with her buyers.

One thing that happens with buyers is when they come in, we tend to walk them through a conversation that has to deal with criteria. We qualify 'em of course, and we start talking about criteria.

And for instance, when we talk about criteria, here's an example of what we might say, "Well, what are you looking for? Are you looking for a three bedroom, two bath? How much square feet, what area of town?" And then ultimately we get to, "and what price range are you in?" And how did you arrive at that price range?"

We always come down to the price range.

Then they got prequalified with the lender, whatever, and then we try to fit round pegs and square holes.

So we look into the market and start telling the client about why they can't afford to be where they want or why they're gonna have to adjust their budget.

That's a hard conversation to have. And...

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