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Ladies! Don’t Let The Gender Pay Gap Force You Into A Smaller Home

Terry Story, Gender Pay Gap

With Terry Story, 29-year veteran Real Estate Agent with Keller Williams in Boca Raton, FL

Steve picks up where he left off last week on how a seller should price a home to attract multiple bids and get more than the home was listed for.

An Overpriced Home Attracts No Buyers

To recap, a home buyer had listed his home for $1.1 million even though comparable homes in the neighborhood had recently sold for about $900,000.

According to Terry Story, buyers and their agents look at comps (comparable home sales) online. They will not come to see the home in-person if it’s significantly overpriced and doesn’t offer good value.  The first sign of this would be virtually zero-foot traffic by serious buyers within the first two weeks of listing.

The Psychological Million Dollar Threshold

Additionally, the million-dollar mark is a psychological barrier that buyers are unwilling to cross if they are looking for homes in the $900,000 range. If people do come to showings, they likely won’t make offers.  That’s the market’s way of telling you that the home is over-priced.

How To Spark a Bidding War On Your Home

Terry recommends pricing the home at slightly under comps.  This should spark heavy interest and a bidding war on your home because of the glut of buyers and the low inventory of homes for sale.

But, Steve wonders, what if you priced the home at $850,000, below its $900,000 market value, and got a cash offer right away.  Would the seller be obligated to take the offer and lose $50,000?

No, says Terry, because listing agreements typically do not spell out the terms and conditions, giving sellers some leeway to deny offers they don’t like.  Just to be sure, sellers looking to underprice should structure their listing agreements to make sure they can deny lower offers.

How The Gender Pay Gap Impacts Home Affordability

Switching topics, Steve wonders to what extent the gender pay gap reduces a woman’s ability to buy a house and whether she can take steps to still come out even in the housing market with men with higher pay.

For instance, in Seattle, men can afford 150% more house than women, and 122% more in Colorado Springs.  So women are at an inexcusable disadvantage when it comes to home purchases because financial advisors recommend spending no more than 28% of your monthly income on a mortgage.

So if women make less, they may save less for down payments, and that 28% rate would reduce the mortgage they can take on, relative to men who make more.

Fortunately, Terry believes there are 5 steps women can take to not compromise on the house they buy, even while earning less.

5 Steps For The Home You Want

  1. Don’t let the down payment scare you away because, if your credit is good, you’d be able to get a mortgage with just 3 percent down through Freddie Mac. So even if your savings are meager, you’ll still be able to save for the 3% down payment.
  2. Line up a guarantor or co-borrower.
  3. Consider a fixer-upper. You may not get the same quality of house initially, but you could end up owning something of quality if you fix it gradually over the years.
  4. Look at homes well below your means, as a safeguard.
  5. Minimize your credit card debt.

Mortgage lenders look at your total debt load—the lower the debt, the better.  If your credit card debt is minimal, you qualify for a bigger loan and, potentially, have a higher credit score.  That higher credit score can lower the interest rate on your loan and help you buy a nicer home.

Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

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Steve Pomeranz: It’s time for Real Estate Roundup. This is the time every single week we get together with noted real estate agent Terry Story. Terry’s a 29-year veteran with Keller Williams located in Boca Raton, Florida. Welcome back to the show, Terry.

Terry Story: Thanks for having me, Steve.

Steve Pomeranz: All right Terry, last week we were talking about pricing your home, and we came on a situation that we had to stop because of time, but I want to continue to explore today.

Terry Story: Sure.

Steve Pomeranz: So you were telling us that there was a home that should have been priced around the high $800,000s. Let’s call it-

Terry Story: Sell. Sell.

Steve Pomeranz: Sell, rather … For $900,000. Let’s just round it up a little bit. But the seller was pricing it at $1.1 million. Take it from there.

Terry Story: OK. So if you price a house at $1.1 million, and the comparables show that the house is worth $900,000, this is what’s going to happen. Virtually you’re going to get very little activity. The million-dollar mark is a huge number, so if the home’s going to sell under a million, you shouldn’t be priced over a million.

Now here’s how you know what’s going on. If you have the home on the market, it’s on the market now regardless of price for two weeks, and nobody comes to look at it, the market is speaking and is telling you you’re over-priced.

Steve Pomeranz: Because people are looking online. They’re looking at the comps. They’re looking and they’re seeing lower comps, and this one’s-

Terry Story: Well the buyers … Remember, the buyers dictate the price, and they’re online shopping. There’s thousands and thousands of websites. So if they don’t make the conversion from looking at the home online to coming out and taking a look at it, it’s not that they haven’t seen the house. They did actually see your house. They just chose not to come see it in person because they don’t see the value there.

Steve Pomeranz: Gotcha.

Terry Story: So, if you price it under a million, you would absolutely pick up more activity.

Steve Pomeranz: All right. So if you don’t see anything in two weeks, it’s overpriced.

Terry Story: Or … and the other way to look at it, if you have a property and you have ten showings and no offer, that’s another indication that-

Steve Pomeranz: It’s overpriced.

Terry Story: … You’re overpriced.

Steve Pomeranz: All right. So that’s fascinating, but remember months ago, we were talking about this concept of instead of pricing it over and then negotiating something in between, we’ll say, what the value is, you price it slightly under the market, trying to elicit a bidding war.

Terry Story: That’s right. That’s a pricing strategy, and it works quite well. You have to know the numbers. You have to know what the value is. But if you take a property, and you price it slightly under, you should have a bidding war, and the reason for that is there’s a lot of buyers out there. And buyers buy when they see good value. They do not make offers on properties that they don’t feel is of good value.

Steve Pomeranz: OK. So, I want to take it to an extreme-

Terry Story: Sure.

Steve Pomeranz: Because I would worry about that a little bit. I like the concept very much. So you price it, people start to bid, then the animal spirits start to rise, and it’s like, “Eh, so what’s another $25,000? It’s only pennies per months.”

Terry Story: Right.

Steve Pomeranz: And you get into this whole thing, right? What if you priced it under the market. Let’s say it was worth $900,000 and you priced it at $850,000, and then someone came in and says, “I’ll pay you $850,000 cash.” And you say, “Oh, no. I wanted a bidding war, and I’m not getting one.” First of all, can you say no?

Terry Story: As a seller, you can say no. You’re not required to accept any offer. Now the question what you’re really asking me is … or another realtor would want to know is, “If I bring you an offer, and it’s full-price, what’s the obligation of the seller?”

Steve Pomeranz: Yeah.

Terry Story: Some people believe, and depending on your contract—and you have to read listing agreements—if it is full-price, that the agent is entitled to a commission.

Steve Pomeranz: Whether you sell it or not?

Terry Story: Whether you sell it or not. Now, the defense to all of that is there’s always terms because a lot of the listing agreements—at least the ones that I’m familiar with—don’t spell out the terms. So you could argue, “Well, yes, you gave me my price, but you didn’t close in two days.”

Steve Pomeranz: Wow. You can make … You can write it up so it won’t work.

Terry Story: Right.

Steve Pomeranz: OK.

Terry Story: So, you know, I guess the point to the whole story is if you are a seller and you’re considering doing something like this, just know what’s in the listing agreement. What are you obligating yourself to?

Steve Pomeranz: Yeah. Well, what if it was really a great price, and I said, “Here’s $850,000. Let’s close tomorrow afternoon.”

Terry Story: Well, the seller may have said, “No, I really wanted to close a year from now.”

Steve Pomeranz: OK. Let’s close a year from now.

Terry Story: No, really I want to close one day after.

Steve Pomeranz: Whatever you want. OK, I get it. All right.

I want to change gears here because I found this really very interesting. You know, you see constantly information about the wage gap, the gender wage gap.

Terry Story: Yep.

Steve Pomeranz: How women make less than men. So when you extrapolate those lower numbers, and then you assign, let’s say, a percentage of your income that you should only be putting towards your mortgage, and kind of general rule of thumb is 28%.

Terry Story: Right, 28%. Good rule of thumb.

Steve Pomeranz: So, if you make less, and you apply the 28%, that means that, as a woman, let’s say a single woman, you really can’t afford the same amount or type of houses or the amount availability of houses that a man can who makes more-

Terry Story: That’s right.

Steve Pomeranz: … Can afford. So give us some statistics on this, and let’s go through that.

Terry Story: OK. Well, here’s some things about it. If you are a woman and you’re in this situation, there are things that you can do to combat this situation. First, don’t let the down payment scare you away. Number one.

Steve Pomeranz: Well, we talked last week about, go ahead.

Terry Story: Yeah. Well, because last week we discussed this, and now you can get 3% down payment loans-

Steve Pomeranz: Freddie Mac.

Terry Story: … Through … Exactly. Freddie Mac.

Steve Pomeranz: Yeah, so 3%. So don’t be afraid of that, to begin with.

Terry Story: Right.

Steve Pomeranz: Because there is money out there where you only have to put 3% down.

Terry Story: The other option you have is line up a guarantor or co-borrower. So that’s an option for you. Third option, consider a fixer-upper. You may not be getting the same quality of house as that man is, but certainly you can consider purchasing something more of a fixer-upper. And then look at homes well below your means. That’s a safeguard. Everyone actually should be doing this.

Steve Pomeranz: Yeah. Not in Boca, but-

Terry Story: Right. Everything’s expensive here.

Steve Pomeranz: OK. Go ahead.

Terry Story: And then minimize your credit card debt. So if your credit card debt is minimal, two things. You have less debt, number one. And number two, you will potentially have a higher credit score. And with a higher credit score, you can actually obtain a lower interest rate when it comes to purchasing.

Steve Pomeranz: So that could really help. So you really want… You’re kind of in competition, and you’re starting out with a disadvantage. So getting a good credit score would be a strong component of you being able to get a mortgage and get a better rate and that may give you the ability to buy a little bit more expensive house.

Terry Story: That’s correct.

Steve Pomeranz: OK. Very good. You know, there are some statistics here. I was shocked by these. So when looking at where these discrepancies really matter, in some of the urban areas, the results were pretty bleak. Seattle, for instance, has the biggest wage housing gap. Men can afford nearly 150% more homes than women.

Terry Story: Wow.

Steve Pomeranz: In Colorado Springs, Miami, San Diego, San Jose … In Colorado Springs, for example, men can afford 122% more homes than women. And even in San Diego, it’s still a significant 68%. So-

Terry Story: That’s a large number.

Steve Pomeranz: Yeah. So, you know, women’s wages have to rise, in order for them, obviously, to be on par, doing the same work. But it has effects downstream-

Terry Story: Sure.

Steve Pomeranz: … That you just really never think about. And I thought we should bring this up today.

Terry Story: Very good.

Steve Pomeranz: My guest, as always, is Terry Story, a 29-year veteran with Keller Williams, located in Boca Raton, Florida. And she can be found at terrystory.com.

Thanks, Terry.

Terry Story: Thanks for having me, Steve.