Potential home buyers

Indeed, getting a financial frame of reference for your home search first can greatly cut down on the amount of time you spend looking through ads and walking through properties with a real estate agent. These are often the most time consuming parts of a home search and by simplifying them at least somewhat, you can spend more time on homes better suited for your financial situation.

However, there has been some misconception over the difference between getting pre-qualified for a particular amount and getting pre-approved for a particular purchase price. These two terms mean very different things and as a seller is looking over your offer, each term conveys something different and has a very different impact on that offer.

What Is Pre-Qualification?
In both processes, a lender will take down your financial information and provide you a rough estimate of what you can afford to pay for a home. A pre-qualification exercise can be seen as more of a rough draft of what you might be able to afford. While a lender will ask for your financial information, the lender will not typically go through the process of verifying your information or doing more research into your financial viability.

If you tout that you have been pre-qualified for a particular amount, it is certainly better than not having any idea of what you can afford. However, it says nothing about your actual ability to get a loan for that amount and instead says that you could probably get a loan for that amount. If a seller sees that you are pre-qualified for an amount approximating the sale price of the property, that does communicate some amount of credibility but not the credibility pre-approval suggests.

What Is Pre-Approval?
In contrast to pre-qualification, pre-approval is given to a potential buyer by a lender that has done significant homework into your financial history and has agreed to loan you the amount you have been pre-approved for. This carries much more weight than pre-qualification and communicates very clearly that your finances are in order and you are in prime position to buy a property that falls within range of the pre-approved figure.

When a seller sees that you have been pre-approved for the amount of the sale price, that seller takes your offer as a much more credible prospect than a contract that does not have pre-approval attached. Not only can pre-approval save you time during the search for a home, it can save you time when you eventually find that property. Pre-approval saves the time typically taken to secure financing after an offer is made and can often deliver a home to a potential buyer quicker.

Short Term Investor

The world of real estate investing can certainly seem like a vast one full of many different types of projects and opportunities. That can certainly be true, but by asking yourself the key question of what kind of investor you want to be, you can cut through a lot of that material and focus on the activity that you will not only benefit most from, but will enjoy the most as well.

Asking yourself whether you are a short or long term real estate investor will go a long way towards determining the types of project you should spend your time pursuing and the kind of information you should be soaking up from as many sources as possible. For those that answer the question as short term, your primary purpose is to buy low and sell high, no matter how you get there. There are two main ways.

Put A Home Through Rehab
Perhaps the most common way to take a low-sale price home and convert it into a higher sale price home is through renovations on the property that add real value to the piece of real estate. You’ve no doubt heard of flipping homes or renovating homes and this is where those types of investors put their resources.

The draw for this type of investment just like any short-term investment is the prospect for a quick payoff. Indeed that can be the case but those pondering a pursuit of fixer-upper properties should keep in mind that it takes time and experience to get through a real estate transaction efficiently and first time real estate investors can be overwhelmed by the renovation experience.

The key goal here is to find properties that have the potential to sell for far more than their renovations might cost. That search is being done right now by hundreds of real estate investors in your area, so pinpointing the best opportunities can often be a difficult, competitive pursuit. It may be a good idea to partner up with a seasoned investor on a few transactions before setting out on your own to get the hang of renovations and the homes that are best suited for that kind of investment.

Find A Gem
Many real estate investors skip the renovation portion of the process all together and focus on properties that are undervalued on the market and could be resold almost immediately at a higher price. Obviously, these properties can be more difficult to find and the risk involved is usually higher because undervalued homes are usually undervalued for a reason.

One demographic that finds this type of investment particularly attractive is made up of committed real estate investors that also have a license to buy and sell real estate. One of the key barriers to reselling a home is the expense entailed in real estate commissions on both the purchase and sale of the property. For those that act as their own realtor, that cost goes away and the prospect of a profit increases greatly.


Malcolm Gladwell wrote Outliers in 2008. It is as relevant today as it was then. Real estate agents, brokers, and managers could all profit from reading it. Gladwell, the author of Blink and Tipping Point, has subtitled this work “The Story of Success”, and what he has to say about the topic both shatters some old myths and also provides us with a better understanding of how success comes about.

One of the most memorable chapters in the book is titled “The 10,000-Hour Rule”. Its point could be expressed this way: No matter how much talent and native genius you have, to become a success you have to pay your dues. Gladwell considers a number of cases of people who might be thought of as “world-class” geniuses. He points out that “the closer psychologists look at the careers of the gifted, the smaller the role innate talent seems to play and the bigger the role preparation seems to play.”

The author discusses “Exhibit A” in the study of talent, a 1990s study of violin students at Berlin’s elite Academy of Music. Now, all of the people at the school were very talented. But even among the very talented, there are differences in performance ability. With the help of faculty at the school, researchers grouped the violin students into three cohorts. At the very top were those who had been identified as having the potential to become world-class soloists. What the researchers found was this, “the thing that distinguishes one performer from another is how hard he or she works. That’s it. And what’s more, the people at the very top don’t work just harder or even much harder than everyone else. They work much, much harder.”

The title of the chapter derives from this fact: “…researchers have settled on what they believe is the magic number of true expertise: ten thousand hours.” “‘The emerging picture… is that ten thousand hours of practice is required to achieve the level of mastery associated with being a world-class expert — in anything,’ writes the neurologist Daniel Levitin. ‘In study after study, of composers, basketball players, fiction writers, ice skaters, concert pianists … what have you, this number comes up again and again.'”

Does all this have meaning for an aspiring real estate agent? I think so. To be sure, we may not have a standard for measuring a “world-class” real estate agent, and the idea of “practice” does not straightforwardly translate from fields like music and sports to the skills an agent needs to hone. Nonetheless, the general point can be applied. Do you want to become a successful agent? Practice. A lot. Talk to people about real estate. Do open houses. Become totally familiar with available inventory, financing options, and applicable laws. If you don’t have transactions, create hypothetical scenarios and write the contracts and do the math. (The role that brokers and managers can play in this should be obvious.) Maybe you won’t need to do this for ten thousand hours. Maybe it would be satisfactory to be very good, if not world class. What about five thousand hours? Or three? Or two? Whatever it is, success is not likely to come overnight or without work.

Home Investing

Zero down investing has been one of the big buzz words recently in the real estate investment industry and while there are many things positive about such a situation for a real estate investor, there are also some bits of information that need to be cleared up for anyone interested. Zero down investing can be a great experience for all involved, but having a better understanding of the process will give you a more realistic view of when to use zero down investing as a tool in your real estate transactions.

Zero down investing is not a one-size-fits-all prospect, so understanding a few of the available techniques used to accomplish the goal of zero down investing can help you decide if a particular situation is ripe for that type of financing solution. Not every situation will be eligible for a zero down investing technique, but knowing what is available will help you make that determination. Here are a couple methods.

The Double Loan
Typically, a seller will want around 75 percent of a property’s sale price up front in cash to even think about pursuing a possible real estate transaction with you. Getting a loan from a bank with no down payment for that 75 percent should not be difficult as there are many ways to get guaranteed for such a loan and many banks offer loans without ever delving into your employment status or income level.

So, with that 75 percent out of the way, the problem then becomes scrounging up the last 25 percent to complete the sale. Seller financing is one way to accomplish this and can often work out well for both sides. If the seller finances the last 25 percent of the transaction with no down payment in exchange for favorable terms, you have yourself a zero down investment accomplished through pursuing two separate pieces of the financing puzzle.

In this example, the seller will not only get a nice chunk of cash up front but will also have the benefit of interest-bearing payments over time as a nice investment. Of course, you will have two payments to make and the rent coming in from your investment property would have to be substantial enough to pay both payments, but those properties do exist. Many investors have accomplished investing goals through this method.

Enter the Note Buyer
Involving a note buyer in your zero down investment goal adds a layer of complication to the proceedings and should only be pursued if you truly understand what is being accomplished through involving one. In a note buyer scenario, financing is offered to a property seller in the form of two loans. One loan makes up the bulk of the selling price but is padded with extra value. Another loan makes up the remainder.

For example, on a $100,000 property, one loan could come in for $80,000 and the second for $30,000. Note buyers will purchase mortgages and other loans for a discount, in this case the $80,000 loan. By selling that $80,000 loan to the note buyer for $70,000, that cash is sent to the seller and the note buyer receives the mortgage note in return.

Qualify homebuyer leads

You prepared your home for winter as homeowners do every year. How’s that going so far?

Mid-way through the winter (Yes, I am an optimist by nature.), how well have your plans and precautions worked out? Are there things you should have done and now regret patching temporarily or skipping? Are there precautions you took that appear not to have been necessary – so far?

For many, winters are not what they were. “Seasonal” and “normal” no longer apply to much of our local weather. Eastern states had weeks of “unseasonally” warm fall weather while many southern states have struggled with “unseasonally” wet and snowy weather. Standard preparation for seasonal or normal winter weather in your location may not include enough precautions. Preparation should be as extreme as our weather.

Will this winter teach you to expand stockpiling and equipment acquisition to include coverage for weather beyond the norm?

If snowfall is atypically extreme, you may benefit from broadening resourcefulness by adding flood clean-up supplies to your shopping list ready for the spring melt. In addition, prepare your property. For instance, make sure lot grading will carry water away from your home.[bullet] If snow was a rare event, but colder weather is no longer a complete surprise, play it safe by insulating exposed pipes or having necessary supplies on hand for burst-pipe clean-up.

If severe storms are increasingly more likely, compile a “be prepared” list of recommended professional services, so you’re ready to quickly arrange high-quality repairs – everything from roof and windows to collapsed hillsides and burst pipes. This knowledge will ensure fast recovery from unexpected damaging weather.

If you have mature landscaping, protect your investment shrubs and trees from high winds and other potential damage. Think ahead because replacement with smaller, younger plants will change the look of your garden and potentially the curb appeal of your real estate.

Stop everything and celebrate when unseasonal pleasant weather appears. Make sure you take advantage of every minute.

The best time to prepare for winter 2018 is right now. As well as taking monthly and post-storm inspection walks around the outside of your buildings and around the perimeter of your property:

Make note – jot on the calendar, add to your phone, open that file – of anything that could use adjustment, seems worn out, or that frustrates you now. For instance, last winter, I spent too much time hauling bags of salt from the rear garage when the front sidewalk iced over. Last fall, I modified front-yard garden storage, so a few bags of salt can be stored close at hand, ready for easy winter application.

Behind of The Real Estate

There are times when the growth of the real estate industry has drawn the nervous energy of local or national media expecting a downfall after a period of prolonged growth. There are some serious flaws in the logic behind expecting a burst in the real estate bubble nationally and during any period of prolonged growth, you as a real estate investor should not panic in the expectation that a market fall will ruin your investment.

Of course, there are exceptions to every rule and there are times when a very localized market depression (such as the downturn of an area neighborhood) can profoundly affect a real estate investment. Extrapolating things like that into a national concern, however, ignores the fact that there really is no national real estate market.

The overall picture of the real estate market that the media uses to describe economic indicators is really made up of thousands of small real estate markets. Any time that a market is spread over that great of an expense, the chances of every tiny market failing at the same time are extremely slim. That is indeed what would be necessary for a national real estate market crash, making such an eventuality extremely unlikely.

To call something a “crash” takes an extreme drop off over a short period of time, something that would be difficult to accomplish in any real estate market. Pieces of information like population growth, new construction statistics and other economic measures can forecast a general trend for any real estate market well in advance.

Certainly, real estate markets will downturn from time to time, but no downturn happens in such a short period of time so as to trap investment money. Generally speaking, you can always get out if the writing is on the wall and that fact separates real estate markets from something like the stock market that can crash more easily.

The nature of real estate investment also provides some insulation behind any kind of dip in the real estate market. For those holding properties over a long period of time as investment opportunities, if a dip does happen in the local real estate market, the long term nature of your investment dictates that you will hold it long enough to see an upturn in the market. Real estate markets rarely stay down for over a decade and for a long term investment, that storm can certainly be weathered.

For short term flips, often the atmosphere of the local real estate market will not have time to change by the time you are looking to sell off your investment project. Fixer-upper properties and the like will often take a few months when the arrival of a market depression can take at least that long to show up.

Early economic indicators will tell you what the market may be like in a few months time and that is certainly something to look at when getting involved in a short-term investment. Simply put, by the time a market depression could affect your short-term investment, you’ll probably have sold it off.