I don't typically re-blog post but I think this post written by John Cannata is just INCREDIBLE!! I have disabled comments please comment directly on John's post.
BEWARE: There could be dangerous twins in your area. They are called Fear and Greed!
Although these twins do not always hang out together, you will often hear about how they destroy one thing or another. It's not their fault. They were left on their own as children and had to learn about the tough world. Unfortunately, they keep listening to the wrong people. Their idols are different than yours and mine. Most recently, they have had a lot of focus on Real Estate. I know you are wondering how can you tell them apart and what should you do if you find them?
Well, Fear is the younger twin. He is unsure of many things in the world and is easily influenced by the articles he reads and hears about. Plain and simple, he is just afraid of what 'could' happen. This feeling may have been caused when he was younger, tried to be like his brother, Greed, and was unsuccessful. Perhaps it did happened because he watched too many movies or maybe he went to Vegas and watched too many people lose their money. No one really knows why and no one has taken the time to show/tell him differently. You may have run into him in your area without even knowing.
Here are some things that Fear may say or talk about, as well as some helpful tips for you:
- Fear - "I don't want to buy a house that will decline in value. I heard all markets are down 18%."
- Tip - Show/tell them stats in your area. True that the overall average price decline is 18.2% but that is because some areas are down over 30% and others are down 2%. For example, DFW is down 3% on average and maybe less, depending on your specific market (Frisco Texas is up 1%). If you are a Realtor in North Dallas, I may have listed your city numbers in this post.
- Fear - "I'm not sure I would qualify for a home loan because I heard banks are tightening their requirements and not lending money."
- Tip - As you know, this is incorrect. Sure, banks are looking at files more carefully. But that does not mean you do not qualify. Take a litmus test: Is credit over 580 (540 with some lenders), verifiable income, no BK or FCL within last 3 years? if they have a FICO above 580 (540 for some lenders), receive a pay check, and have not been in Bankruptcy or Foreclosure for the past 3 years? There is more too it, but this will get the ball rolling.
- Fear - "I don't know if I make enough money to buy a home, so I just rent." or "The attendant at the local 7/11 told me to wait because it will get worse."
- Tip - If you have not spoken with a professional, then you still have no idea. Suggest a local mortgage professional talk with your client to see what they may qualify for. Advice from people outside the business or someone that knows 'someone' is not a viable resource. Besides, who knows where they receive their information.
- Fear - "What if I lose my job like the other 500 million people per day?" (thank you Jim Crawford)
- Tip - If my grandma had balls, she would be my grandpa (no offense grandma). The point is that you can not live off of 'what if'. As you can see from the video, sometimes even the 'professionals' get stats wrong. Share the stats in your state, county, city. For example, Texas actually increased employment from last year by 153,000 compared to the year before (yes, that's including the last quarter). Unfortunately for other states, Texas is the only state with positive numbers. But perhaps your area is not as effected.
Now, Greed is completely opposite of his younger brother. Greed is always thinking WIIFM (what's in it for me). Often he is thinking of the quickest way to make a buck without spending money or working too hard. He wants to own the BEST and the BIGGEST, but doesn't want to pay more than the worst and the smallest. Again, its not necessarily his fault. Greed has always looked up to those that rolled the dice and got lucky. He is hoping to get lucky as well. You may have also run into Greed in your area without knowing.
Here are some things that Greed may say or talk about, as well as some helpful tips for you:
- Greed - "Im holding out for a lower interest rate."
- Tip - Sure, rates could decrease another 1/8 or 1/4 percent, but it could also increase (without notice). If you are not already approved with a lender, you may miss out on some of the lowest rates in a very long time. Don't squabble over 1/4 percent while rates are low already and home prices are still low.
- Greed - "I may be able to buy the house for less and/or wait for the listing price to drop"
- Tip - Take the advice of your Real Estate Agent and make an offer that is fair in comparison to the market. Don't focus on 'low-balling' the offer or holding out. Not everyone is looking for the lowest price and someone could come along and steal your dream home.
- Greed - "I think my house is worth more than what you are suggesting, Mrs. Realtor."
- Tip - There is not doubt that you will feel that your house is worth more... to you. Current sales for your size home show a different story. The good thing is that the house you want buy is also lower than what the sellers think its worth. This is a win/win market in many cases.
If you see these twins in your area, don't panic. As a matter of fact, welcome them into your home. Show them some pretty pictures of the real world and how it could be if they were a little more open-minded. There are a WIDE variety of homes on the market today, so the choices are almost endless. Mortgage Companies are still lending money to the majority of applicants. FHA is a fantastic loan product for those with less than perfect credit and/or with little money down. And lastly, the rates are still outstanding!
Bottom line... Explain to them why its still a good market to buy and sell Real Estate.
Other helpful reads may include the following:
Always available for your Frisco Texas Mortgage needs!
John Cannata p# 214.545.5604