47. HOME SERIES 3 OF 8 – THE HOME SEARCH PROCESS

Home Series 3 of 8

Adrian   00:02

Hello future millionaires and welcome back to the get rich slow podcast. We are your hosts Adrian Shermer, Rob Delavan and Lance Johnson. Good morning, gentlemen.

Rob Delavan   00:11

Good Morning

Adrian   00:13

Today we are going to continue our series on the home buying process and we’re pulling a lot of this data. Once again, this is a great dataset to use, because it’s real numbers from the industry, the National Association of Realtors, as a pool from July 2020 to June 2021. They recycle this every year and we’re going to be looking into the home search process itself today. So, it’s an important part, obviously, of what we do is helping people find homes, but how do you do it?

Rob Delavan   00:47

Right and the article, it’s called the 2021 highlights from the profile of home buyers and sellers and we’re specifically going to be pulling from page eight and the section on the home search process as far as the heading so and we’ll have that in the show notes for letting you guys know where you can pull the detailed data and so forth. I wanted to share with you guys a success story this week. We’re right in the middle of spring, ramp up hot tax or hot while we’re in tax season. We’re also in hot buyers season four homes. This is across the country also, of course in the Portland metro area where we primarily work. It has been hot, we had three listings go live the second half of this last week and all three of them were in contract by the end of the weekend above list price three for three this week. So, we’ll see where we end up next week but that seems to be the trend at the moment so we’re cooking. For upcoming events, please go to ROI-FA.com/events, we have a number of things that we’re working on from little client wine events, to we have a movie theater event coming up where we’re inviting past clients and so forth to come and enjoy a Saturday with rubbing elbows with us and all of our fellow folks and amongst others. So, just go to ROI-FA.com/events for that and that will also be in the show notes and lastly, for our websites, we have the ROI-FA.com Delavan-realty.com and directorsmortgage.com/AdrianShermer.

Adrian   02:42

[Inaudible 03:11]

Rob Delavan   03:03

Recap is for you, Adrian, we’re on recap.

Adrian   03:07

Yeah, I apologize; I jumped into this a little too early. I’m gonna do a little reset Avery. Alright, in today’s episode, we’re going to be discussing, as I mentioned, the home search process. Once again, this is stats from the National realtor. So, the National Association of Realtors, this dataset is from July of 2020 to June 2021. They do this every single year; we’re looking forward for the next set coming up as well. Especially as quickly as things have been moving in this marketplace, we want to get that updated data. But this is finally getting us some post COVID chunks so that we can really see how things are starting to settle. The information that’s provided supplies and understanding from the consumer level, it’s so it’s actual trends that are currently transpiring and just as a reminder, this is part three in an eight-part series.

Lance Johnson   04:04

So, Rob, based on the statistics on page eight home search process, the first section or paragraph 41% of recent buyers first step in home buying process began online looking at properties for sale. What websites would you recommend for your buyers looking at to get a more real time look at buying houses, can you comment on that?

Rob Delavan   04:33

Yes, so where most folks go just due to popular culture at the moment there’s a website that starts with a Z and it can be very frustrating. What happens is there are listing feeds from the local listing services ours happens to be RMLS.com that’s the real time information as real estate brokers put it in update things and so forth, it’s real time, these other syndicated websites don’t always have the updated information directly or they pay for a cheaper feed, then the listing services would like and therefore, you’ll see something that maybe was pending a day or two days or three days ago, often on different sites and is listed as active and it’s frustrating for buyers, is, this is the perfect house and they don’t know that it’s been off the market for four days, they must have gotten

Adrian   05:47

That’s a good one, it’s not available anymore but that’s a really good choice

Rob Delavan   05:52

And then building on that the other pieces is just shopping online. They’re saying, oh, that house was listed for 550,000 as an example and that’s totally within my budget, well, maybe their budgets up to 575 and this house actually went for 650 and that’s also frustrating. So, going directly to the feeds are the armless.com, we tend to set up a direct search, that will come out as often as daily. That would be hey, here’s the area and the parameters that you set up and this will give you everything that fits within those parameters. The second piece is it’s actually not a website, we like to use home snap. It’s an app and it started a number of years ago with this app, this idea that you could put, open up the app and your phone or your phone camera turns on and you can point it at the front of any house in the country throughout the United States and you get them immediately it’ll cross reference and give you the address and all of the data on that property, including recent sales listings, all the data that they would need and valuations, which is pretty cool. What’s fun about that app also is we send out a branded app to all of our clients and any realtor across the country can actually do this, they will send it out, it’s branded. If the client likes it, it’s a real time feed just like RMLS.com and they can flag the properties that they like and their real estate broker gets notified, hey, these are the properties that we want to see. So, that’s usually the process, typically, that requires having a little bit of engagement there, Lance versus just going to the random sites that we all maybe know and love, but we kind of love to hate because it’s frustrating.

Adrian   07:51

This statistic animal shocked me 41% I was like, man, I feel like everybody just jumps online and starts looking at houses, but maybe they don’t consider that the real start your search. I mean, it’s a hobby for a lot of people, right, just searching through various websites he was on, I think he got to just click on with what your realtors doing to you want to get that alignment. I mean, you guys use I like homespun I have a lot but the data that it lets you share, it helps you serve your customers better. So, it’s a win-win in my book.

Lance Johnson   08:21

Yeah and I think it’s today’s nature to be on Facebook and people will call Facebook and articles nowadays. There’s no quality of what’s being posted on Facebook, but it’s just the initial steps. So, the question is, how do you get to that initial step and then get to the right place and it’s just get them to the professionals to help them with it and let’s face it, 10% of the people doesn’t matter what you do, they’re going to be do it yourself first, but 90% need your help.

Rob Delavan   09:02

Adrian based on the stats from the NAR and this is again on page eight of these characteristics of the 2021 homebuyers, buyers typically searched for eight weeks and looks at a median of eight homes and viewed three homes only online. When it comes to the pre-approval letter process, what’s important for buyers to keep in mind as they make offers and keep their pre-approval letter up to date? So there’s a little bit to unpack here.

Adrian   09:30

Sure and I’ve got a huge bias but there’s a reason that I do things the way that I do and it’s experience. All my pre-approval letters have the address of the exact property we’re dialing in, if you’re making an offer, that’s a serious proposition, you should at least have the math done correct to make sure that everything is fully dialed in. For a lot of people that’s not an issue, they’re not redlining themselves by going right up to the limit of what they can get a pre-approved for anything but it’s still, I’ve had two houses that have the same value and the taxes can be $100 difference per month and that makes a big for a lot of people the monthly payment is the final selling point on the value of the house. So, making sure that the pre-approval is dialed in making sure that you’re working with a lender that’s reputable. There are a lot of companies that don’t have the reputation for attention to detail. Oftentimes, local companies or companies that at least have a local reputation. I mean, Rob, maybe you can speak to this a bit, too, from the selling side, what’s it like when you receive that pile of pre-approval letters, what stands out? I mean, I know we had a win recently, where 29 offers I was one of two lenders, the seller confided in me that actually called the seller’s agent to say, hey, my people are legitimately qualified, they’re serious. We took the time to actually get their paperwork and not just have them tell me what they make each year, I can tell you, I’ve been burned enough times by that to learn that lesson. We have to vet it and sometimes people don’t even realize, oh, I wrote that off, or yes, my business made a million dollars last year, but we spent $900,000, making it that’s still a great income but it’s not a million dollars a year income on paper for a loan, it’s a different number. So, making sure you’ve been run through underwriting and properly vetted as part of that process for us.

Rob Delavan   11:12

That’s a question we ask a lot of the lenders on the listing side of the offers that we’re actually considering, typically, if we have five or 10 offers, we’re probably going to narrow it down to the couple best and best is defined in a whole lot of ways which we won’t necessarily dig into the weeds on that today. I’m definitely looking on the listing side looking for typically, someone local, somebody who’s going to answer the phone, that’s a big test point, if they actually answer the phone, reasonably during business hours, especially even occasionally on the weekend, they’ll actually answer the phone or call back quickly. That’s important and then just typically looking at this from, it takes average, eight weeks, a lot of people take a lot longer and it depends on the market and the seasonality of the market right now we’re in the spring side. So, things are hotter and it might take longer to find a house, just because there’s more competition versus in the fall in winter for Oregon but you go to Arizona and everybody wants to buy and sell in the winter so it’s also nice down there.

Lance Johnson   12:22

And I like to expand on this. I mean, there’s a wow factor involved. So, in the past, meaning the last, since 09 interest rates have come down, this is we’re seeing the threat, isolation and the rise and a long term rise not it rises one year and then it drops back down again. Prices are greater so you talked about 25,000, 100,000 over asking price. So, we do and we’ll talk a little bit about this later in this podcast, but you get pre-approval and you have a house that goes 100,000 but it doesn’t appraise okay, where’s the money coming from all that kind of stuff? Can I interest rates are going up? Can the monthly payments go? So I know you talked about 29 offers on a house and you guys got it. But how many times you’ve been in a listing agent and you got 15 offers but the first three, were all sudden now they do the price comes in at a higher value. It’s too much for them that sternum check; those first two people have bailed out because it’s just too expensive. The interest rates are too expensive or they need to do a home improvement and now the home improvements now not 50,000 is 100, 125. So, there are a lot of elements right now in the pre-approval when you want that client to have the wow factors that stacked up against them. You know they come in second, third, fourth, how do you deal with that, the remodel is twice the remodel they thought going in? Yeah, that they had to pay extra but they need more cash down, then so I think the great mortgage real estate agent is really understanding and preparing that client for all those because they want the biggest house with the least amount of payment and there’s a threshold that’s available and those clients need to prep a little bit more so and that creates the wow when there’s no guarantees there’s a lot of things there’s a lot of variables nowadays on that.

Adrian   14:57

All right Lance, let me ask you when should a buyer loop their financial advisor into the home buying process, what do you recommend?

Lance Johnson   15:05

So the day they’re having a little get together with their friends and they’re talking about moving to the next day, they’re filing taxes, because it’s going to help them but when you got this inclination, this dream of getting this next new house, you we should really start going through the process of what’s it going to look like with all those variables I just talked about, before when interest rates are coming down, if by the time they sell the house, the interest rates came down, so the payments are a little bit less, maybe the price of the property was a little bit less and they’re competing with three people, not 15 people and so now the complete opposite. So, when I talked about a threshold of cash flow and being house poor, somebody who’s like looking at a 500 to $600,000 home, I might have to do 5, 550, 600 but now that $600, home comes in at 7 and got it so now it’s 650, 700 and then all sudden, interest rates are not coming down because they came down, it’s a little bit better. But if they get a little bit worse, there’s a lot more scenarios to really know what a client’s threshold and Rob and Adrian, have you been in a position where a client goes in, they want to 600,000 out how they found the house of their dreams, they were 15 people got accepted offer and then said, oh, my God this is a lot more expensive than I thought and have you ever been in a situation where they had to bail out because it’s just too much and so I think the more you can run these scenarios, sooner than later, you want to create a wow factor for the client, you want it as smooth as possible. You want them to know, it’s always funny to watch property brothers and be like, oh, that’s gonna cost us $13,000 to redo the termite damage that we didn’t know about introspection, which is interesting. That’s always amazing then these events occur and that’s what’s happening now…

Rob Delavan   17:19

Well, of course, the fun part about that, as you know, TV is not exactly reality because we’re generally able to find those things. Not all results are going to be the same for everybody in that scenario with that said it’s fun to have these conversations from a financial advisor standpoint, because the way I translate that into the real estate world, Lance is you’re exploring, like the tolerances, kind of the margin and you have to, as somebody who’s looking to buy, or sell, or, frankly, do anything in the real estate world, build wealth, if you will, one way or the other or try not to lose, depending on everything. So, what ends up happening is if you’re right up against that tolerance of just, this is as good as we can get and if interest rates change an eighth of a point, we just can’t do it, we probably need to circle back around to do another lap or two, with the financial advising side.

Lance Johnson   18:32

You don’t want a client to buy a house and have buyer’s remorse and for property values were going up and show it to come down. So, if you had a delay 60 days to close versus 30, just because of whatever reasons or you had to do a remodel and we know a remodel takes, three months but reality six months now and by the time you get done with the six months, it’s not up 10%, it’s up 30%, 40%, at the end of the day, we’re coming up against these different scenarios that really get people quicker to their threshold and what you don’t want to do is have a family of four or five that can’t play sports can’t do all these things, vacation, it’s all work, no play and their house poor. You just don’t want to put a client in that position. Well, let me put it this way, if you did, how many referrals you’re going to get.

Rob Delavan   19:34

Yeah, it’s an interesting conversation just because and we’ve talked about this before, pulling in that financial advising, exploring those tolerances from a cash flow standpoint. The house side, like my main portion is really just going out and doing your homework but with your feet by walking through and figuring out what your dollar will get you today versus tomorrow versus yesterday and then really the financial in the lending is just because you could afford it up to that very top dollar does that really mean? Is that where you want to live or do you want to be somewhere in that middle? And I don’t know, it’s just been prudent…

Lance Johnson   20:22

And part of the home processes, people will say to me, like the 41% is, I started looking for a house, I’m like, online, I’m like, you’re not looking at a house on, you’re not really ready to buy because at the end of the day, if you’re 15 to 25, potential buyers for that house, it doesn’t matter. There’s only one buyer, everybody else is in second place, or worse, it doesn’t matter whether you are third, fourth, fifth or sixth, right?

Rob Delavan   20:50

Yeah, it does not

Lance Johnson   20:52

Nobody puts the bad pictures on and so you got to go touch and feel the house, you know and sometimes you’ll look at a house and go, wow, there’s potential bones and then good bones and you can do a remodel and then I think there’s also, man, sometimes you just get the best pictures and what’s behind the other side of the room?

Adrian   21:24

Yeah, like, where do you put the camera [Mixed Voices 21:31]

Lance Johnson   21:30

I’ll have a bunch of clients go like, oh, man; we certainly found these five holes we think are ideal. I’m like, alright, the meeting after those is, how many were good. One, the rest of them were terrible, you don’t see online the best ones behind the scenes and so you got to kind of touch and feel and go out and look at those properties and see right out there.

Rob Delavan   22:01

Okay, so that’s a wrap on our home search process. 2021. Stay tuned for our next episode in this eight part series. The next one, it’ll be episode four. We’ll be learning about home buying and real estate professionals. So, that’ll be interesting when you guys can put me on the hot seat.

Lance Johnson   22:21

Until then, you know, I like to do that.

Rob Delavan   22:24

You do, it’s always fun, until then, thank you all for listening and we’ll see you on the next get rich slow podcast.