Home Radio Segments Real Estate Round-up Hallelujah! The Self-Employed Are Finally Gettin’ Some Respect From Lenders

Hallelujah! The Self-Employed Are Finally Gettin’ Some Respect From Lenders

Terry Story, Real Estate, Self Employed

With Terry Story, a 30-year veteran with Keller Williams located in Boca Raton, FL

Steve spoke with Terry Story, a 30-year veteran at Keller Williams Realty. During this week’s Real Estate Roundup, Terry talked about her success in closing home sales and the difficulties being faced with interest rates and a shift in the housing market.

Falling Interest Rates

Steve noted that buying a home is so much easier since the Federal Reserve stopped raising interest rates. The housing market has reacted swiftly to this. Terry agreed: “Buyers come out of the woodwork to buy homes when the 30-year fixed rate mortgage is down to 4%! They want to catch the rates while they’re low.”

Despite this, many buyers put in for a home, then back off if interest rates rise, thinking that they’ll come back down later. Sometimes they do and sometimes they don’t. As a potential home buyer, you want to make sure that you get the best interest rate possible, so it pays to ask your realtor and lender what the realistic prospects are for interest rates going higher or lower in the foreseeable future.

Pending Sales

It’s definitely a busy time in the real estate market. Terry said that in the past month she’s had more pending sales than she’s ever experienced in her three decades in the real estate business. In fact, she notes, there are more than twenty pending sales sitting on her desk right now. But it can be an up and down thing since it sometimes happens that a deal will fall through after the realtor has already set up an account and drawn up the contract. Pending sales put real estate agents in limbo, waiting to hear if the buyer is going through with the purchase of the home or not. Still, the most common reason for a sale to fall through is the home inspection. The house, for one reason or another, will fail or come up short in the home inspection, and then the seller and potential buyer can get into long, drawn-out negotiations over who’s going to pay to fix what.

Fortunately, at Keller Williams, the percentage of buyers who follow through is around 90%. It’s that high because Terry and the other Keller Williams agents all do their homework to make sure that the buyer will be completely happy with the deal and purchase the home. But it’s definitely a buyer’s market at the moment. They have all the control. That means they tend to be more demanding, like asking the seller to take care of more and more issues before they’ll agree to buy the home. And of course, they’re lowering their bids.

The Self-Employed Are Storming The Market

One noteworthy trend in home buying is the number of self-employed individuals looking to buy homes. This is a big deal because they represent a major part of all the wealth in the U.S. However, the difficulty is that major lenders such as Freddie Mac or Fannie Mae have tended to set up a lot of red tape and hoops that the self-employed have to jump through to get approved. But just recently, Fannie Mae and Freddie Mac rolled out automated underwriting technology changes for lenders that take a lot of the guesswork and risk out of the approval process for self-employed people. And because so many self-employed individuals are seeking mortgages, many banks and real-estate agents are making it easier for them to get the mortgage they want.

To learn more about buying or selling a home, or about real estate in general, visit Terry Story at www.//terrystory.com/ or Keller Williams at  https://www.kw.com/kw/.

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 is a 30-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: Purchasing a home has just become a lot cheaper thanks to the fact that the Federal Reserve decided to stop raising interest rates. The market really reacted to that and interest rates have come down dramatically. The 30-year fixed rate, according to this article, is now at just hovering over 4%, which is down from over 5% just a few months ago. Are you seeing that out there?

Terry Story: I sure am, it’s awesome news. And the buyers are coming out of the woodwork.

Steve Pomeranz: Yeah, yeah.

Terry Story: It’s amazing how that works.

Steve Pomeranz: [LAUGH].  When interest rates drop 1%, that sure makes housing, the monthly payment much more affordable.

Terry Story: Oh, absolutely, and they’re recognizing it, and they’re seeing it. And you know what’s funny, Steve, if the interest rates go up, the buyers jump out of the woodwork, too. So I think they should just move it up, down, up, down, up, down. [LAUGH]

Steve Pomeranz: That’s not very nice.

Terry Story: [LAUGH]

Steve Pomeranz: They’re anticipating, they want to catch the rates while they’re low.

Terry Story: Correct, and as they’re rising, they’re afraid, oh, it’s going to go up higher-

Steve Pomeranz: That’s right.

Terry Story: So I better jump in before it’s too late.

Steve Pomeranz: But at a certain point, they just close the valve, they shut the valve and they go on vacation.

Terry Story: Right, and then they’re like, we’ll just wait, I’m sure it’ll come back down, and then they don’t. And then that’s when we get all nervous as agents, and they drop them and then they come back out, it’s fun, good stuff.

Steve Pomeranz: [LAUGH] I can’t believe you just told me all that. Are you seeing a big pick-up in your business?

Terry Story: Actually, Steve, I have been doing this for 30 years and this past month was the most pending sales that I’ve ever had in 30 years, so that says a lot.

Steve Pomeranz: That’s good you-

Terry Story: We’ve put a lot of contracts together.

Steve Pomeranz: So how many pending sales you have out there now?

Terry Story: Over 20.

Steve Pomeranz: Wow.

Terry Story: Which is really, really a lot.

Steve Pomeranz: How long does it take for the average house to close versus the time the contract is written or signed?

Terry Story: Sure, a contract, once it’s signed to close, on average is 45 days. People will ask for 30 to 60 days, so you’ll go with an average of 45 days.

Steve Pomeranz: You’ve got over 20 homes in the pipeline that are going to be closing.

Terry Story: Right.

Steve Pomeranz: What percentage of those actually do end up closing?

Terry Story: It’s very high for me because we really do our homework, it’s well into the 90s. We do have an occasional fallthrough, but, Steve, you’d think the fallthrough would be mortgage, it’s not. Our number one fallthrough is just the inspection.

Steve Pomeranz: Of course.

Terry Story: And the buyers this go-around are getting aggressive in what they’re asking the sellers to take care of. Before it would be, wow, I’m so happy I got the house. I’m not going to ask the seller for anything. Now, they’re coming up with a laundry list of nit-picky, ridiculous, small items. And in many cases, they’re in the driver’s seat again.

Steve Pomeranz: So you’re feeling pretty strongly that we’re in a buyer’s market?

Terry Story: Absolutely, especially depending on the price point, but absolutely we are.

Steve Pomeranz: Let’s talk about price points. First of all, that is a different answer than you gave me, let’s say six weeks ago, where you were on the fence, it was a balance.

Terry Story: Right, and all of that really has to do with price points. For example, the ones that I’m sharing that the buyers are being aggressive in what they’re asking for, these are closer to the million-dollar mark.

Steve Pomeranz: Okay.

Terry Story: And they are in the driver seat, the buyers. When you get to a more balanced market and our market at say, 500, 600, it can go either way.

Steve Pomeranz: Yeah.

Terry Story: And then, when you’re in the lower price range, say three under three even four, it’s the sellers are still in control. So they’re like we’re not going to take care of it, so if you don’t like it, next.

Steve Pomeranz: So what are we seeing? We’re seeing aggressive bidding on these higher price homes; you’ve got $1 million home and their first offer is low? How is that?

Terry Story: They’re not doing so much that. The sellers are having to reduce the price to a price point where it becomes attractive to the buyer. I have one particular case, where we are in a multiple offer situation on a $900,000 home, that we accepted the one offer, it fell apart during the inspection period for no real reason. The second buyer came back into the picture, but this time they were like, oh no, we’re not going to pay the price that we offered you. We’re now going to pay you $20,000 less. Oh, and by the way, you’re going to take care of every little thing that could humanly possibly be wrong with this house—which it was a newer built house and there was really hardly anything there.

Steve Pomeranz: Hardly anything. So how did that go? Did they do it, did they take it?

Terry Story: We accepted it.

Steve Pomeranz: Wow.

Terry Story: And we’re having to take care of things that are just over the charts.

Steve Pomeranz: It’s a little humiliating.

Terry Story: It is very humiliating.

Steve Pomeranz: [LAUGH]

Terry Story: But that’s the market.

Steve Pomeranz: It’s just business, honey.

Terry Story: So it’s a shift, to me that’s the clear sign that we are absolutely in a shift.

Steve Pomeranz: So if you can afford it, the deals are in the upper end of the market. They’re moving slower-

Terry Story: Correct.

Steve Pomeranz: And you’ve got some negotiating or bargaining power there. In the lower parts of the market, it’s kind of like, nah. The prices are at such a price point that there’s not a lot of wiggle room.

Terry Story: That’s right, ‘cause there’s a lot of buyers out there, the demand is high.

Steve Pomeranz: Yeah, well, we’ve seen mortgage applications jump 9% last week. Now I’ve been saying this for a while because, obviously, every day I’m watching the interest rates.

Terry Story: That’s right.

Steve Pomeranz: And they’ve been coming down for a little while now, but we haven’t really started to see any evidence in the mortgage market, but now we are.

Terry Story: That’s right.

Steve Pomeranz: Right, so people have gotten wind of it, and those who are looking to buy a house are kind of jumping up and down and they’re taking out mortgages.

Terry Story: Yep.

Steve Pomeranz: That’s cool, that’s cool. Okay, so, there’s also a big change coming in the market with regards to those who are self-employed getting mortgages. And I have to say right up front that this is huge.

Terry Story: This is great news. I’m self-employed, so, yea, I can even get a mortgage.

Steve Pomeranz: Well, you know the self-employed person really represents a lot of the wealth in the United States. And historically, they have had more difficulty getting mortgages because the way the mortgage system is set up, you have these big mortgage companies like Freddie Mac and Fannie Mae, and they work through lenders. And they have these applications that have to be filled out, and it’s very hard to kind of figure out the income stream of a self-employed, you’re a good example of this, right? I mean some months great, other month zero, [LAUGH]

Terry Story: Starving [LAUGH]

Steve Pomeranz: And that’s just the way small business works and self-employed works, so they haven’t really had the technology to deal with it, but now they do.

Terry Story: Yeah, this is great news. I’m excited because that’s one of the first questions I ask when I’m working with somebody is are you self-employed? Not that I care that they’re self-employed or not, but I know what kind of headaches we’re going to have. And that they need to start their mortgage process well in advance of us starting our house hunting.

Steve Pomeranz: Well, I think that’s going to change because here’s a quote: “Fannie Mae and Freddie Mac rolled out automated underwriting technology changes for lenders that take a lot of the guesswork and risk out of the approval process when the self-employed apply for a mortgage loan.” Lenders have been reluctant to approve loans for the self-employed because in part it’s expensive

Terry Story: Yep.

Steve Pomeranz: Time consuming and labor intensive to gather and analyze the paperwork needed to verify income and to gauge risk. It’s so much easier with a salaried employee-

Terry Story: Sure.

Steve Pomeranz: It’ll give me 18 months or 24 months of your salary, your paycheck-

Terry Story: The tax returns themselves, I know

Steve Pomeranz: The tax returns, oh yeah.

Terry Story: Like ten feet, ten inches

Steve Pomeranz: Yeah, you got to go plow through K1s and all other stuff. So this is very good news. And I think this is really going to be a big boom for the housing industry. So we said it here.

So we are out of time for this segment. Terry always joins me every single week. Terry’s a 30-year veteran with Keller Williams located in Boca Raton, Florida, and she could be found at Terrystory.com. Thanks, Terry.

Terry Story: Thanks for having me, Steve.