Millennials More Bullish on Real Estate

Consumers are beginning to feel more positive about homeownership than they were even six months ago, a recent survey by Trulia revealed. In fact, one in four surveyed consumers marked an increased confidence and 31% of renters plan to purchase a home within the next two years.

Millennials, consumers ages 18 to 34, are often the most skeptical, as they’ve grown up during the years of boom and bust. However, of the Millennials polled, 93% plan to buy a home at some point. Interestingly enough, 43% of young adults are already homeowners. “Millennials have been shaken, not scarred by the housing bust,” said Jed Kolko, Trulia’s Chief Economist.

“Nearly all of them want to own a home someday if they’re not homeowners already. But many of them think today’s low prices and low rates will last. They may be in for sticker shock if the cost of homeownership has returned to normal levels by the time they’re ready to buy.”

2012 was the year of low housing inventory, down 43% compared to 2010, which created many limitations for potential homebuyers. But 22% of homeowners said they will certainly consider selling their home in 2013, paving the way for a broader inventory moving forward. Specifically, homeowners who bought their homes between 2010 and 2012 may consider selling as their home value most likely increased since the time of purchase, allowing them to sell at a profit.

“2013 could be the year that inventory turns around, just as 2012 was the year that prices started recovering,” said Kolko. “Homebuyers need inventory to choose from, and with fewer foreclosures on the market, new inventory will come from new construction or homeowners wanting to sell. Rising prices will bring out more sellers, especially if price increases lift them back above water.” Source: Trulia

Mike Ervin, Mortgage Banker

NMLS # 282715

(650) 735-5261

www.mikeervin.com

 

Achieving a Smooth Loan Closing

We recognize that everyone has a choice when it comes to fulfilling their home finance needs. We are chosen by many homeowners each year because of our reputation for recognizing the importance of delivering superlative customer service. We also recognize that for many people, purchasing or refinancing a home is the most important financial decision they will make in a lifetime. We believe that this transaction should be treated with the respect it deserves and that is our mission—to make the American Dream of Homeownership a reality as part of a very enjoyable experience.

You Can Help!

A smooth and successfully closing experience is our goal. One of the keys is working as a team throughout the process. You can help your team help you in several ways…

·       When we contact you with questions or additional documentation, a quick response is important. Often times the process can be slowed considerably if we don’t receive an answer expediently.

·       If there are any changes in your financial situation or within the transaction, please notify us as quickly as possible. While the changes may not have a bearing on the work we do, sometimes we will have to make adjustments because of changing circumstances and we can only do so when we are informed of such changes.

·       Forward any documentation you receive or documentation requested by us as quickly as possible. For example, we should receive a copy of your new insurance policy early in the process so that we can review the document. You can use any insurance company to insure your home, however, if you would like a recommendation from us, contact us and we will be happy to help you in this regard.

·       If the expected date or time of loan closing changes, please contact us immediately. Any change in timing may cause details of the transaction to be adjusted and any delay in notification could cause the closing date to be delayed further.

·       Make sure you ask any questions on your mind. It is not a bother to answer questions from our clients, it is a privilege.

Our goal is to keep you informed throughout the process. We will be available to answer questions and respond to your requests as quickly as possible. It is very important that you have an enjoyable closing and we will work as hard as possible to make this goal a reality.

 

 

 

Mike Ervin, Mortgage Banker

NMLS # 282715

(650) 735-5261

www.mikeervin.com

 

Adding Value To Your Sphere

Marketing plan and sphere of influence. These terms are referred too much of the time when one is talking about marketing. But there seems to be no clear definition of these terms. Everyone agrees that they are all very important. But no one agrees what exactly they are. Therefore, we will give you our definition.

Sphere of influence. A sphere of influence is comprised of two main components.

• Those who know you and you know them. This component of personal relationships is the most important of the entire sphere.
• Those you have something in common with. Though less important than the other component, this part of the sphere can be very significant when formulating a marketing plan. Of course how much you have in common is imperative. If you are over six feet tall, you have something in common with other tall people. But this is not important to your sphere. If you have attended a particular church for 20 years, this is something that may be very important in regard to your sphere. In regard to attending a church or a school, there will be those at the institution that you know and others with which you just have this membership in common.

The sphere itself is comprised of seven main categories. It is the organization of these categories that can be helpful when developing a marketing plan—

• Personal: friends, family and neighbors.
• Previous customers: from your present business and previous businesses.
• Previous prospects: those who decided to purchase from someone else or those you could not serve or chose not to serve.
• Previous employees: those you have worked with.
• Vendors: those from which you purchase goods and services and those who sell the same to your targets.
• Associations: academic, religious, business, civic, hobbies, interests, sports and more.
• Professionals: doctors, lawyers, accountants, financial planners, etc.

So you know what your sphere is comprised of. How does that help you devise a marketing plan? In simple terms—a marketing plan is the process of delivering value to your sphere. A marketing plan should be focusing on doing four things—

• Determining what is the highest value to deliver to certain segments of your sphere and how to deliver this value.
• Prioritizing the contacts within the sphere—from highest to lowest.
• Moving people and businesses into the sphere.
• Moving contacts up in priority within the sphere.

In essence, the sphere should resemble a pyramid. At the top of the pyramid will reside the most important contacts within your sphere (and there will be less of them, of course). At the bottom are the less important contacts (perhaps alumni members you don’t know). You can see how this process of prioritization can direct your marketing activities.

You may be calling and/or having business meetings with those on top of the pyramid. On the bottom of the pyramid, you may be mailing or advertising to these people. If you must advertise, doesn’t it make sense to advertise to people with whom you have more in common?

Sphere segmentation and prioritization also helps immensely with the value proposition. Now you can determine how best to deliver value. For example, with vendors you should be focusing upon helping them build their business. Why should they help you if you are not helping them?

One last question focuses on the term prioritization. Simply, a high priority target contains the potential for a high concentration of business to refer. You also should have a close relationship with that target and should be able to deliver value to that target. For example, if your spouse had the potential for referring a lot of business, shouldn’t that be your top priority? Focus on what is important and you will have a better chance at improving your results.

Mike Ervin, Mortgage Banker

NMLS # 282715

(650) 735-5261

www.mikeervin.com

 

Are You Underestimating The Power of Tax Deductions?

Have you ever had question's about tax deductions? I strongly recommend that you get yourself hooked up with a great tax professional. The amount they can save you will be far more than the amount they will charge you! The most frequent tax question that I hear is "What exactly does it mean when I hear that my home is tax deductible?" I'll explain using your primary residence as an example. Let's say that your $2,000 monthly mortgage payment includes $1,300 in interest, $200 paying towards the principle,$300 in real estate taxes, and $200 in home owner insurance. In this example, the $1,300 in interest and the $300 in real estate taxes are both tax deductible. The $1,600 spent on those two things is tax free. In other words, the first $1,600 of your paycheck is now tax free! Normally you would have $432 taken out of your $1,600 paycheck that now doesn't need to be sent to the IRS. Instead, it's free to go in your pocket. So that $2,000 house payment really costs you $1,568. That's great news! Do NOT underestimate the power of tax deductions. The best part is anybody can use these deductions! You don't have to be rich to buy a home, you just have to have strategies, and that's where I can help you. Give me a call if you are thinking about buying a second home, I'd be happy to help you & make sure you save the most money! I look forward to hearing from you soon!

The Real Cost of Free

You have probably heard of the popular saying that “there is no free lunch.”  Therefore, when you are offered a service or a product for free we are all conditioned to look for a “catch” of some kind. Well the real estate and mortgage industries are no exceptions in this regard. How many times have you heard a mortgage company say—-refinance at “no cost”?  Or a real estate agent may advertise listing services at “one low fee”? 

Well, we all know that there is no free lunch. There are no “free” refinances. And as far as the “one low fee” listings—you get what you pay for. 

There are closing costs associated with both purchasing a home and/or obtaining a mortgage. With regard to mortgage costs, you may pay taxes, appraisal and credit report fees, fees charged by the mortgage company, fees charged by the settlement company and more. On a $300,000 mortgage, the costs may be in the range of $3,000 to $6,000 and even higher for someone with poor credit. So how can you get by with not paying these costs?

Simply, the mortgage company can charge you a higher rate and recover the costs in the secondary market after the loan is sold. Explaining the process of selling the mortgage is not important at this juncture. However, explaining the choices given to consumers is very important. 

A consumer can opt for a rate of 3.5% and pay $5,000 in costs or the consumer can opt for a rate of 4.50% and pay no costs. One is not a better deal than the other as the mortgage company may generate the same revenue in each situation. Note that the rates are fictitious for comparison purposes only.

So which is better for the consumer? Simply it is a matter of time. In this case we must make some very simplistic assumptions—

• The present value of money is the same as the future value of money. High levels of inflation can actually make money paid in the future less expensive than money paid today.
• The consumer can afford to pay the costs and can qualify at any rate (they have the choice). Many consumers do not have cash or equity in their home to pay these costs or need a lower rate to help them qualify. 

Looking past these assumptions as well as the fact that some of the costs as well as the payment can be tax deductible, if the consumer uses the mortgage for a long time. They may be better off with the lower rate and higher fees. If they pay $5,000 in fees and also pay $200 less monthly. They will recover the cost of the fees within 25 months, or two years. If they are going to purchase another home or refinance in less than two years, they are better off not paying any fees and going with the higher rate. If they don’t purchase or refinance for ten years, they are better off paying the higher fees.
  
It is important to note that I’m not advocating a “no cost” mortgage or a “high fee” mortgage. Every mortgage has a cost and you must look at the individual situation to see what is right for you. The decision may hinge upon many factors, including time, tax brackets, cash reserves and more. There may be no free lunch, but it is good to have choices. 

The same concept applies to real estate. When someone is offered the service at a flat fee instead of a percentage of the sales price you must ask, where is that agent making their money? There is no free lunch. But that is a topic for a future discussion.