Learn about Real Estate by one of the premier Real Estate Investors in New Jersey. Each week Joseph J. Zoppi will be talking about investing in real estate including buying and selling houses and apartments. Understand how the economy, the Fed and world events impact real estate and how to adjust to these dynamics.
Templar Real Estate Radio Show for September 19, 2020
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The following program was paid for by Templar Real Estate. The views and opinions expressed on this program are not necessarily those of the staff and management of WMTR. As always, it is advisable to consult a professional before making a major decision.
It’s time now for the Templar Real Estate Talk Show. Here’s your host for the program, Joseph J. Zoppi.
Joseph J. Zoppi:
Hello, welcome to the Templar Real Estate Talk Show. My name is Joseph J. Zoppi, a real estate investor, consumer advocate, author, and managing partner of Templar Real Estate Enterprises. You could reach us at templarcashforhouses.com. That’s T-E-M-P-L-A-Rcashforhouses.com, it’s one word, or you could call us at 973-240-8593, and we could answer any questions you may have. You could also email us from our website and we could address any questions on the air that you’d like or any questions in general, or if you need any services from us.
My company is a real estate investment firm, we buy houses for cash, we purchase apartment buildings, we do joint ventures with other real estate investors, we loan money for rehabs and provide transactional or gap funding. We work with individuals that want to invest with us in single-family houses up to apartment buildings. We do not speculate and we are very protective of our money and our investors’ money. I’m not a real estate agent and we’re not a brokerage, but I have individuals on staff that are agents that will sell your house the traditional way through the traditional Multiple Listing Service.
The show is going to go over everything there is about real estate, those things that impact real estate, we’ll talk about our rehabs, some of our investments, what went well and what did not go as well, and how we adjusted accordingly. We’ll talk about the economy, interest rates, and other things that will impact real estate. We’ll discuss trends in the real estate market. Real estate is one of your biggest investments, so it’s important that you know as much as possible about real estate.
I will provide you with my opinion, it’s only my opinion. I encourage everyone to do due diligence in anything they do, especially on the financial side. It’s very important, and I always talk about make sure it’s balanced, make sure you get the pros and cons of both scenarios and understand if an author is writing something, understand their slant on the topic in general and try to get an opposing view.
I’d like to have a shout out to one of my listeners that always listens, Paulette, so hello, Paulette, hopefully, you’re doing well. This past week, I was interviewed for US News and World Report, so it came out on September 16 and the subject was what to consider before getting a reverse mortgage in retirement. So I’ll speak a little bit about reverse mortgages. A lot of people have lots of questions, they think it’s this mysterious loan, they don’t understand it. It’s pretty straightforward. So basically, a reverse mortgage is a loan secured by your residential property and it enables the power to draw up on the equity of the property. The loans are predominantly used for older homeowners and usually do not require monthly payments, which is a good thing, and a lot of times, individuals that have retired want to draw on their equity.
So there’s a couple of different ways of doing that. One of them is to get a home-equity line of credit which is called a HELOC, or reverse mortgage. Reverse mortgage is good because you don’t have to go through as much in terms of that. HELOC, you might not qualify for. That’s the first thing. Second thing, they really tightened up lines of credit for your home, so some banks are just not giving them out right now, and everybody thinks everything is going great and superficially, everybody says, “Oh, the economy is doing well,” or “It’s getting better, and home prices are shooting through the roof,” and all these other things that are going on, and to be honest, the banks are very concerned, and if the banks are concerned, I think you should be concerned because these individuals are forecasting and they are looking at things pretty far out and if they are concerned, like I said, you should be concerned, and we are definitely concerned. Since this happened, I’ve been very cautious in certain things and we are seeing how things are being played out, that’s what I’ve been pushing on individuals that want to sell, to sell quick and seize the opportunity. I think that’s extremely, extremely important.
So on the reverse mortgage side, there’s a number of pros associated with it. The homeowner continues to live in their home and retains title as long as they meet the loan obligations. So what are the loan obligations? Loan obligations are usually, you have to pay your property tax, you have to pay any maintenance, insurance fees, and if you’re in a townhome or a condo, you have to pay your homeowners association fees. If you don’t do that, then the loan could be called and you’re going to have to either put up the money or they are going to want you to sell the house. It’s one or the other, and so it’s very, very, very important you meet those obligations. You could choose, from a homeowner’s perspective, when you have reverse mortgage, you could choose different options in terms of receiving the funds, so it could be like a lump sum one-time payment or line of credit where you could just draw upon it, or a monthly scheduled advance, so $500 every month or $200 every month to maybe meet some shortfalls you have or any combination thereof. So that’s a good thing. The funds for the reverse mortgage can be used for any purpose at all, and that’s good. Homeowners do not need to make any mortgage payments. Like I said, as long as you live in the house and you meet those obligations, that’s the biggest thing.
Now, on the con side, the loan balance continues to increase as time and fees, and interest on the loan accumulate, so you have X amount of equity in your house, but there’s fees associated with it, so you’re just not drawing down like $1000 a month and that’s it. There’s interest on it and there are fees on it, so again, you could burn through your equity fairly quickly and you might be surprised, but you could go through all your equity and you could still live in the house, that’s the good thing. The only problem is also is that if you are expecting for your heirs after your passing to get something for in terms of equity, they might not have equity left on the house, so you really gotta watch that and you really have to talk to a financial planner, a good financial planner about that and understand all the ramifications associated with it.
Also, homeowners’ eligibility for certain government programs such as Medicaid or Supplemental Security Income may be impacted. That’s a big thing, okay? I’ll say that again: homeowners’ eligibility for certain government programs such as Medicaid or Supplemental Security Income may be impacted. So that’s something you need to look at, okay? Also, the fees for the reverse mortgage can be higher than a traditional mortgage, so that’s another thing you need to look at. Again, there are some good things about reverse mortgages but tread lightly, make sure you know what you’re getting into before you do anything with them, okay? They are not illegal, but just watch. I know there’s been a lot of negative connotations with reverse mortgages and I can understand that, but if you need it as a stopgap, that’s fine, but again, you could burn through your equity very quickly and as people are living longer, they could just burn through it, and then if they are planning to use that until they pass and they run out, then we have an issue, especially with, you could say, houses are always increasing 2%, 3% per year but that’s not always going to be the case. We are expecting a pullback, I don’t know when, but there always is a pullback in terms of housing prices. They get to a point where it’s too high, and then there has to be an adjustment. So again, if you’re banking on some of those things, just be wary, I’m always very concerned about things like that.
So again, if you are interested in selling your house for cash, we’re more than happy to help you with that. Give us a call, and you could just ask, “I need to sell my house fast for cash, can we talk about it?” I’ll come on-site or one of my staff members will take a look at the house, and then we’ll provide you with an offer. We always give you a couple of different options. We cannot ever give you just one option. Except on certain circumstances, there might only be one option, but we don’t like to shoehorn anyone into that’s the only way to go. Now, there are certain situations where the house it’s in such disrepair that that’s the only option there is, is a cash offer, but there are other times where we could see different scenarios, what’s the best option? Maybe they sell through the Multiple Listing Service, maybe if you don’t get the price you want or it stays in the market too long, then we can purchase it for cash, so there are a few scenarios on that and each individual has certain needs and we like to address the solutions to those needs and make sure that they are satisfied with that. That’s very, very important for us.
Another thing, we get a lot of calls because individuals go on our website, they will look at the video testimonials, these are real people that have been nice enough to – we give them videos and they recorded them, and they’ve given some stellar reviews. We really have, a lot of our customers are just ecstatic with everything we give them because in the end, we set expectations very clearly and that’s very, very important that expectations are set and we meet those or exceed those, and that’s what we try to do always, is exceed them, but we are very conservative, so we might give you a conservative projection in terms of when you sell your house, but we would rather be on the conservative side, and then when we overdeliver, everyone’s really happy. A lot of times, when we coach you on a house, we want to sell it for you, we will give you a conservative number and we’ll say you’ll get this number and you can feel confident with that, but that doesn’t mean that we won’t list it higher, and we will push very hard for you to maximize how much you’re going to get. We don’t want to just sell your house quick just because we get the commission. That’s not the way we do it. We really want a very happy client, and of course, to give us a great testimonial also.
So I’m closing out this segment. I will return shortly and again, you could reach us at 973-240-8593 or at templarcashforhouses.com. Thank you very much.
Joseph J. Zoppi:
Welcome back to the Templar Real Estate Talk Show. My name is Joseph J. Zoppi, managing partner of Templar Real Estate Enterprises. You could reach us at 973-240-8593 or templarcashforhouses.com. If you need to sell your house fast for cash, please give us a call. Also, if you need to sell through the traditional Multiple Listing Service, also please give us a call, we’d be more than happy to take care of that and I think you’ll be pleasantly surprised by our service.
Right now, I’d like to talk about a couple things. One is about a house that I had spoken about a couple of weeks ago. We had put it up for sale, it was one of our own rehabs, and we priced it very high, and we are seizing on the opportunity with this COVID and limited inventory, and we had some concerns. We had it under contract. Originally, it was an FHA buyer, she backed out, and we reduced the price $10,000, and we got it under contract again, we got $5000 over our adjusted asking price, so that was good, but we knew still, the price was very high, and we were concerned about the appraisal. When we went into contract, we requested that the appraisal be done before the inspection. Traditionally, the inspection is done first, then the appraisal. Well, our house is really well done, so there really isn’t a concern from the buyer so much for the inspection. The inspection has to be done but everything is brand-new in the house, just about. We received the preliminary information on the appraisal, so it’s probably $10,000-$15,000 lower than what the buyer put into the contract and said they would pay for. We will eventually have to negotiate once we get a formal price back but we expected it to be around that number, so there was really no surprise. Now, we have an inspection going on, that was just done and we would have to negotiate accordingly based on what comes back from the inspection as well as what we are going to give back because of the difference in price.
One of the things that, when we put a house on the market, we always price it a little higher than maybe it should or a little higher than the appraisal amount that we expect, and when we put a house on the market, it’s based on emotion. The individuals that are going to buy the house are going to base it on emotion because traditionally, our houses are the nicest ones in the neighborhood, and we usually sell our houses within basic communities, they are not very high in communities like, we’ll say Livingston or Madison where every single house is nice. We really, for the most part, like Madison – one house is just nicer, nicer than the other – they are all really nice houses. If you start driving around, there are certain areas that are nice, up-to-date, but traditionally, you could look through 10 houses and they are all beautiful with beautiful finishes, where you go into another neighborhood where it’s a nice neighborhood but they are not the finest finishes, they are dated, so on and so forth. So when we do this, we are doing it based on emotion and that’s very important. People look at the eyes, they go, “Wow, I want to live here.”
Right now, we are just waiting back, like I said, for the inspection and we’ll see where it goes, we will see what changes we have to do. One of the things that we also usually do with our houses, and sometimes, we recommend it for our clients, is that if the individual or the agent, the buyer’s agent gets full asking price or above it, we will give a $2000 bonus. I mean, these are different things that you can do to incentivize the buyer’s agent. Now, sometimes, they don’t even realize that there are these different options or incentives within the contract, but after they say it, they’re like, “Wow, another $2000,” so it makes them – it entices them. We also usually do, if it’s under contract within the first month, we will also give another maybe $1000. So again, we are trying to drive the behavior of the agent, the buyer’s agent, and again, sometimes it works, sometimes it does not. A lot of times, the agent does not see in the Multiple Listing system all the different options we give in terms of incentives, but when we do, it really drives or helps drive a better price which is good. We always recommend it. Now, with certain individuals that we recommended to, they’re kind of shortsighted with that and they don’t just look at it as – they just look at it as if they’re going to lose $2000, and that’s not a good way of looking at it. Everything we do is really based on those numbers and how to drive behavior, whether the behavior of the buyer looking at the house and saying, “Wow, I want this house,” or the behavior of the buyer’s agent that says, “Wow, I want this extra bonus.” So those are the things that we are always looking at, those subtleties to drive certain things. We negotiate, we want to make sure that we have a good position from a negotiation perspective and how to mitigate certain risks which is very, very important. You put something under contract, that doesn’t mean it’s going to come to fruition in the end, and that’s really, really important that you have to understand that.
One of the things that happened two days ago, I received a call from a woman, she had a condo or a townhome under contract and she sounded like a lovely woman, it was her and her mom selling the contract, the condo, they lived together down South Jersey, and she said, “Joe, I’m already packed and everything, and I find out now that the contract is not going through. The mortgage wasn’t approved,” and she was just in tears, and she was holding it together pretty well, I thought, because she had banked on selling the townhome and moving down south, but the mom and where her family is, and she explained the story to me and it kind of resonates in terms of what happened with us on this past house and FHA, and so on and so forth.
So what happened was she listed the house for, I think, $188,000, the townhome, and she might have negotiated down to $180,000, that, I wasn’t clear with. It was an FHA loan, they had an appraisal, a lot of the FHA appraisals, they’re all over the place and you really can’t tell where they are sometimes, and sometimes, they come in considerably lower than you expected, so her appraisal came in at $175,000. I looked at her house and I looked at the comps in the area after we got on the phone, I thought it was a little low, but that sometimes happens with FHA and that’s always a concern of ours, is the appraisals and also, the inspections. So it came in a little lower, she lowered her price from what I understand, and the gentleman said he needed an extra 30 days to close. He said okay and she put off everything, then she finds out that he was furloughed all this time and he was going back to work, and they pushed it back another month. After that happened, he went back to work, but what happened was that he was only part-time, so when he reapplied for the mortgage, it didn’t go through. Now, she’s upset and the agent that she worked with did bring it up to her, said, “Do you want to relist it?” and her and her mom said, “Well, we’d like the buyer and we’d like to continue with it,” and now, he’s very upset that this has happened. She’s kind of upset with the agent too which I don’t think it was the agent’s fault. The agent brought it up and said, “Do you want to put it back on the market?” Now, I don’t know if the agent said, “We could put it back on the market or we could be accepting backup offers,” and that’s what we would do and that’s what we did with some past houses, we said, because we were concerned about FHA, that we would be accepting backup offers. So I don’t know if that happened, but she was very upset at that. She says, “Joe, can you just buy my house? I would like to move out and I’ll move down south,” I’m going to go look at the house this week or I think one of my staff is going and we will see where it goes.
But the other thing is that she’s under contract right now with the agent. I don’t know if she could get out of the contract. I know she’s looking into that because I want to just buy it for cash, and we’ll see where it goes. I’m not going to do anything against the contract. We always adhere to all those things. Some agents will cancel a contract even before it’s up or others will say no, if it’s six months, it’s six months, and that’s it, that’s why we always recommend doing it for less time in case you’re not satisfied. Now, with us, if you ever want to cancel the contract anytime, you can just cancel it anytime. We are not into forcing people to stay into a contract like that. We are just not when we are selling the house through the Multiple Listing Service. We are not like that. We want someone to be happy and if they want to get out of the contract, they are not happy. We do obviously whatever needs to but if you want out of contract, you want out of the contract. It’s that simple. We really never get that scenario where someone wants to be out of a contract, but if that’s the case, that’s the case. We’re always looking at our clients’ best interest. If they feel that the best interest is to go with someone else or do something else, or stop listing the house – whatever the case may be, we are always going to work with them. That’s one of our fundamental principles for Templar, is to make sure that our customers are happy, our clients are happy, and we would do anything possible to make them achieve what they need to achieve. Yeah, that goes with our investors, we always have really happy investors because we set expectations, we said this is how much you’re going to get and they get it in a timely fashion, and you can’t ask for more. Especially these days because there’s always the excuse, “Well, I didn’t know about this, I didn’t know about this,” and excuse upon excuse, and that’s not with us. If we said we’re going to do something, we’re going to do it.
I’d like to thank everyone, have a nice weekend. Again, if you need to call us, call us at 973-240-8593 or templarcashforhouses.com. Thank you very much. God bless and take care. Bye.
The preceding program was paid for by Templar Real Estate. The views and opinions expressed are not necessarily those of the staff and management of WMTR. As always, it is advisable to consult a professional before making a major decision.
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