How's your housing market? (1 Viewer)

[Chadstroma]

I don't think there is such a thing.  Collect all the info you can and make a decision which works best for you.

Also talk to your CPA.  Find out what the tax hit would be.  Did you depreciate the home those 7 years?  

Exactly. There is no "pull the trigger" calculation because the data, the situation and the people with their goals wants are all different. 

 

[Zegras11]

  Did you depreciate the home those 7 years?  

This is why I asked this question.   I bet a lot of people that rent out their first home don't know about this.

 

What happens if I don't depreciate my rental property IRS?

What happens if you don't depreciate rental property? In essence, you lose the opportunity to claim a massive tax benefit. If/when you decide to sell the property, you will still pay depreciation recapture tax, regardless of whether or not you claimed the depreciation during your tenure as the owner of the property.

Example.   You put your home up as a rental after a few years.  The land is worth $100k. The improvement on the land (the home) is worth $275k.

The IRS allows you to depreciate over 27.5 years.   275,000/27.5 years = $10,000 depreciation Expense each year.

If you DO NOT claim this every year, and you rent it for five years and then sell, you will be taxed on an extra $50,000.  (10k x 5yrs as your cost basis would be lowered $50k).

Numbskulls that think the stock market at 8% yearly average yields better than the NET return after taxes on RE is just mind boggling to me.  I calculated my ROI a few years back at around 17.2% per year. I bet Random's is even higher as he paid cash for a lot of his rentals if I recall correctly.

 

[gianmarco]

This is why I asked this question.   I bet a lot of people that rent out their first home don't know about this.

 

What happens if I don't depreciate my rental property IRS?

What happens if you don't depreciate rental property? In essence, you lose the opportunity to claim a massive tax benefit. If/when you decide to sell the property, you will still pay depreciation recapture tax, regardless of whether or not you claimed the depreciation during your tenure as the owner of the property.

Example.   You put your home up as a rental after a few years.  The land is worth $100k. The improvement on the land (the home) is worth $275k.

The IRS allows you to depreciate over 27.5 years.   275,000/27.5 years = $10,000 depreciation Expense each year.

If you DO NOT claim this every year, and you rent it for five years and then sell, you will be taxed on an extra $50,000.  (10k x 5yrs as your cost basis would be lowered $50k).

Numbskulls that think the stock market at 8% yearly average yields better than the NET return after taxes on RE is just mind boggling to me.  I calculated my ROI a few years back at around 17.2% per year. I bet Random's is even higher as he paid cash for a lot of his rentals if I recall correctly.

This is why I'm asking the question I did. Yes, we've been depreciating the home. So, I'm trying to figure out the calculation to see which option puts us ahead.

If I sell the house today for X, after my mortgage balance, commission, etc, I'm left with Y. I'm going to take Y and invest it in the market. In 14 years (the amount left on my mortgage), that money will be worth a certain amount, assuming ~6% return annually averaged over 14 years.

Alternatively, I keep the home, and the rental basically covers my mortgage payment, taxes, insurance, and average repairs. For all intents and purposes, assume no profit over 14 years, but at the end, the home is now paid off. It'll likely be worth more than X today, but I don't know what's a safe assumption. It seems 2-3% increase annually for RE is average. But I don't know how much the tax benefit also factors in. So, in 14 years, what's a safe net return to count on if I keep the home? 

If I have an idea of what that is, then I can figure out what I would need to sell it for now that I'd then invest that net amount in the market with an average return. Basically I have an idea what investing X into the market should yield me in 15 years. I don't know what keeping the home will yield me in 15 years because there's more that goes into it. Is it really close to 17% net when taking all factors into consideration?

 

[Zegras11]

This is why I'm asking the question I did. Yes, we've been depreciating the home. So, I'm trying to figure out the calculation to see which option puts us ahead.

If I sell the house today for X, after my mortgage balance, commission, etc, I'm left with Y. I'm going to take Y and invest it in the market. In 14 years (the amount left on my mortgage), that money will be worth a certain amount, assuming ~6% return annually averaged over 14 years.

Alternatively, I keep the home, and the rental basically covers my mortgage payment, taxes, insurance, and average repairs. For all intents and purposes, assume no profit over 14 years, but at the end, the home is now paid off. It'll likely be worth more than X today, but I don't know what's a safe assumption. It seems 2-3% increase annually for RE is average. But I don't know how much the tax benefit also factors in. So, in 14 years, what's a safe net return to count on if I keep the home? 

If I have an idea of what that is, then I can figure out what I would need to sell it for now that I'd then invest that net amount in the market with an average return. Basically I have an idea what investing X into the market should yield me in 15 years. I don't know what keeping the home will yield me in 15 years because there's more that goes into it. Is it really close to 17% net when taking all factors into consideration?

Very glad you were taking the deduction!

You've described that you basically break even from the rent or make a little above nothing.  My net cash flow is $20 k less than the yearly depreciation allowance, so I get all that money tax free each year and I get to deduct the $20k loss of my working income.

With the depr allowance now, you are likely showing a paper loss you can also deduct for your normal income.  That net tax savings number needs to be calculated into your ROI and decision process.  RE actually goes up 5-6% per year on average. So take that, add the tax savings, add any profit, and add any equity buildup from principle reduction and see if its more than the market return.  I don't think it will be, but it might be close in your case.

It's funny that you bring this up, as wife and I debate almost every day about selling right now or not. We've had our project 17 years as of last week.  I'm desperately trying to find 4-plexes in Boise to tax exchange into as the rents are a lot higher than the Tulsa area we are in. Every project is sold before the plat maps are even finalized.   We finally agreed that if we could not do a 1031, we will keep it four more years as a loan early payoff penalty expires and the property should go up at least 8% in four years and our loan balance will go down enough, so that even paying the huge tax bill will be OK to retire on. That amount right now is just a tad short of where we want it to be. 

 

[BassNBrew]

You can't go wrong selling now IMO.  Especially if you want to get rid of a headache and any potential future headaches.  

Invest the profit.  That investment might make you more long term than keeping the house anyway.  

Just my 2 cents.  I had two rentals, sold one last year for a good profit.  Still glad I sold it.

Strongly disagree.  What did you invest in with your proceeds last year and how has that worked out?  Furthermore, there's no way I'm paying off a 3-4% mortgage when inflation is at 8%.

Real estate is the best way for the average Joe to make life changing money.  It won't happen overnight like crypto or penny stocks, but slow and steady works too.  Also I consider it a forced savings plan.

Numbskulls that think the stock market at 8% yearly average yields better than the NET return after taxes on RE is just mind boggling to me.  I calculated my ROI a few years back at around 17.2% per year. I bet Random's is even higher as he paid cash for a lot of his rentals if I recall correctly.

I think you would be surprised regarding paying cash.

I sold a house (partnership issue made it necessary because it would be up 50% more) two years ago and here were the numbers.

Paid $70k, 10% down.

Rent covered everything, no positive cash flow over that time frame because it got pumped into paying off the second.

Spent $15k getting it ready for sale.  Sold for $137k less $4k in commission.

$133 - $15  - $45 (remaining loan) - $9 to IRS = $64k

$64k / 12 years = $5333

$5333 / $7000 = 76% annual return

If I had paid cash that $64k would have been maybe $100k

$100k / 12 = $8333

$8333 / $70000 = 11.9%

That doesn't even account for the fact that I got back 30% of the $36k in interest paid.  Using other people's money to make you money is genereally more efficient.

 

[Zegras11]

Strongly disagree.  What did you invest in with your proceeds last year and how has that worked out?  Furthermore, there's no way I'm paying off a 3-4% mortgage when inflation is at 8%.

Real estate is the best way for the average Joe to make life changing money.  It won't happen overnight like crypto or penny stocks, but slow and steady works too.  Also I consider it a forced savings plan.

I think you would be surprised regarding paying cash.

I sold a house (partnership issue made it necessary because it would be up 50% more) two years ago and here were the numbers.

Paid $70k, 10% down.

Rent covered everything, no positive cash flow over that time frame because it got pumped into paying off the second.

Spent $15k getting it ready for sale.  Sold for $137k less $4k in commission.

$133 - $15  - $45 (remaining loan) - $9 to IRS = $64k

$64k / 12 years = $5333

$5333 / $7000 = 76% annual return

If I had paid cash that $64k would have been maybe $100k

$100k / 12 = $8333

$8333 / $70000 = 11.9%

That doesn't even account for the fact that I got back 30% of the $36k in interest paid.  Using other people's money to make you money is genereally more efficient.

Thanks for this...  I recall random getting most of his incredibly on the cheap side.

I have 130 first time buyers in the last 7 years that put down 0.5%.  Like $600-1000 on $120-200K homes and had 9 sell last year and received checks after everything ranging from $160-199K. A thousand bucs down and made $160k. Pretty nice return.

 

 

[SFBayDuck]

I'm just amazed every time I see references to $70K, $120K, even $200K homes.  I left the Bay Area after 25 years largely because I knew I'd never be able to buy a home, but even here in Eugene $200K doesn't get you anything other than a double-wide in a trailer park or an empty lot.

 

[ghostguy123]

I'm just amazed every time I see references to $70K, $120K, even $200K homes.  I left the Bay Area after 25 years largely because I knew I'd never be able to buy a home, but even here in Eugene $200K doesn't get you anything other than a double-wide in a trailer park or an empty lot.

Well, some areas pay more, hence higher living expenses.

My house has doubled in value since 2015 and is still probably not worth 200k.  

My house in San Fran would probably cost 4 million

 

[STEADYMOBBIN 22]

With prices on everything, not just lumber skyrocketing, Im not sure you could even build a single family house for less than 200k these days. 

 

[Captain Cranks]

Top 10 Housing Bubbles

He uses Price to earnings ratio, price to rent ratio, and return to long term appreciation trend as a basis for his forecasts.

"10. Atlanta, GA - Atlanta's Real Estate Market has as much as 25% price downside given how expensive home values have become for local workers.

9. Cape Coral, FL - One of the most volatile Housing Markets in America. Cape Coral/Fort Myers is currently in a Housing Bubble but could have another 2007-style Crash given how high prices are relative to rents and long-term trends.

8. Phoenix, AZ - Home Prices in Phoenix today are 50% higher than the previous peak in 2007. Meanwhile, inventory is surging and real estate investors are starting to sell out of the market.

7. Tampa, FL - the home-flipping capital of the US. Tampa has a ton of investor demand that pushes home prices up during Housing Booms and down during Housing Crashes.

6. Charlotte, NC - Charlotte has quickly become one of the America's biggest Housing Bubbles. A sky-high Price to Rent Ratio indicates that both homebuyers and investors will stop buying.

5. Raleigh, NC - Home Values in Raleigh are nearly 35% high than the long-term trend. Which is problematic for a city where migration is below the previous highs experienced in the mid-2000s.

4. Seattle, WA - Seattle lost the most people it ever has in 2021 according to US Census Bureau data. Now Housing Inventory is climbing rapidly and prices are projected to decline 28%.

3. Salt Lake City, UT - a combination of record-high prices, stagnating wages, and too much home building make Salt Lake City one of America's biggest Housing Bubbles.

2. Boise, ID - this will be one of the first cities to Crash. Inventory in Boise is up 118% YoY according to Realtor.com and Zillow estimates show values already declining.

1. Austin, TX - America's Biggest Housing Bubble is without a doubt Austin, TX. Home Values are predicted to Crash by 34% according to the Reventure Consulting Home Price Model.

 

[Zegras11]

Top 10 Housing Bubbles

He uses Price to earnings ratio, price to rent ratio, and return to long term appreciation trend as a basis for his forecasts.

"10. Atlanta, GA - Atlanta's Real Estate Market has as much as 25% price downside given how expensive home values have become for local workers.

9. Cape Coral, FL - One of the most volatile Housing Markets in America. Cape Coral/Fort Myers is currently in a Housing Bubble but could have another 2007-style Crash given how high prices are relative to rents and long-term trends.

8. Phoenix, AZ - Home Prices in Phoenix today are 50% higher than the previous peak in 2007. Meanwhile, inventory is surging and real estate investors are starting to sell out of the market.

7. Tampa, FL - the home-flipping capital of the US. Tampa has a ton of investor demand that pushes home prices up during Housing Booms and down during Housing Crashes.

6. Charlotte, NC - Charlotte has quickly become one of the America's biggest Housing Bubbles. A sky-high Price to Rent Ratio indicates that both homebuyers and investors will stop buying.

5. Raleigh, NC - Home Values in Raleigh are nearly 35% high than the long-term trend. Which is problematic for a city where migration is below the previous highs experienced in the mid-2000s.

4. Seattle, WA - Seattle lost the most people it ever has in 2021 according to US Census Bureau data. Now Housing Inventory is climbing rapidly and prices are projected to decline 28%.

3. Salt Lake City, UT - a combination of record-high prices, stagnating wages, and too much home building make Salt Lake City one of America's biggest Housing Bubbles.

2. Boise, ID - this will be one of the first cities to Crash. Inventory in Boise is up 118% YoY according to Realtor.com and Zillow estimates show values already declining.

1. Austin, TX - America's Biggest Housing Bubble is without a doubt Austin, TX. Home Values are predicted to Crash by 34% according to the Reventure Consulting Home Price Model.

  Boise is in a non-disclosure state and anyone thinking Zillow is accurate is an idiot. They have a $180k range listed for my home.

118% up.  So now we are 75% off normal inventory levels instead of 92% off.  The sky is falling!!

 

[Captain Cranks]

  Boise is in a non-disclosure state and anyone thinking Zillow is accurate is an idiot. They have a $180k range listed for my home.

118% up.  So now we are 75% off normal inventory levels instead of 92% off.  The sky is falling!!

If he looked at our comments in this thread the last few weeks, he would be laughing at us, so a bit of humility is in order. 

 

[James Daulton]

I've been looking for potential retirement places in Florida and vacation condos in OC Maryland and Rehoboth the last 2 years and I'm definitely seeing more zillow price drops now than any time over that time.  It's probably though just because prices have been set so dang high.

But, there's no way houses can remain at these levels with interest rates what they are and getting higher.  I also look at a "how much house can I afford" website from time to time and my buying power is 15% less with interest rates at 5% versus 3%.

 

[Captain Cranks]

30 year fixed now above 6%. Inventory continues to build and nothing going pending in my hood. 

 

[Capella]

I see this now and then also on these reno's. Priced to high from the start.  Also, last week might have been the worst week to list a home with this weekend being the first big, getaway holiday of the year and graduation season starting in some areas.

the house I was referring to is still pending. Like a dozen houses have gone pending in my zip this month but this guy who is a $120 a SF over because he thinks his renovation is worth it won’t budge. He dropped the price 10k the other day though, I’m sure that’ll get it closed lol. 

 

[Gopher State]

30 year fixed now above 6%. Inventory continues to build and nothing going pending in my hood. 

Same here.  One home went pending, but then deal fell through.  Also two new homes that were sold, are on the market by the builder, the people that purchased them backed out and lost their 10k deposit.

 

[TwinTurbo]

Do real estate agents still put up bait and switch listings on Zillow and other sites? I have contacted the agents on a few listings and they string me along for showings, then find a reason to cancel last minute, then want to represent me as the buyer's agent for other homes. These are new listings that are up for less than a day or two. I haven't done this in a while and its super annoying. It just seems like old school sales lead gen bs.

 

[Judge Smails]

The real driver of a bust will be foreclosures.  I would think the great majority of people took advantage of historically low interest rates to get fixed mortgages.  In previous bubbles there were a lot of variables that adjusted way up and crushed people.  Still lots of people buying with cash out there and inventories are low, at least out here.  Think we're looking at a slow down and tilting a little back to buyers, but not an outright crash.  Different environment.  Now if a bunch of people lose their jobs with layoffs that's a different story.

 

[Zegras11]

Do real estate agents still put up bait and switch listings on Zillow and other sites? I have contacted the agents on a few listings and they string me along for showings, then find a reason to cancel last minute, then want to represent me as the buyer's agent for other homes. These are new listings that are up for less than a day or two. I haven't done this in a while and its super annoying. It just seems like old school sales lead gen bs.

Zillow and other sites get their listings from the Local MLS.  The MLS feeds them the info. Unless it's a FSBO.

To get on local MLS, a contract between seller and an agent must exist. An agent just can't post a home for sale. If they do post on MLS, and don't upload all of the contracts and listing detail paperwork by end of next day, they can receive a major fine.

Please explain this bait and switch thing.   How exactly are you strung along for showings?   Homes are still selling in 0-2 days. An agent must mark them as pending by end of business next day.

If you want to buy a home correctly, call largest company in that town, ask them for name of the person that runs the largest team, and ask to be interviewed before you go out looking for homes by that team's #1 Buyers Agent Specialist.

 

[fruity pebbles]

The real driver of a bust will be foreclosures.  I would think the great majority of people took advantage of historically low interest rates to get fixed mortgages.  In previous bubbles there were a lot of variables that adjusted way up and crushed people.  Still lots of people buying with cash out there and inventories are low, at least out here.  Think we're looking at a slow down and tilting a little back to buyers, but not an outright crash.  Different environment.  Now if a bunch of people lose their jobs with layoffs that's a different story.

layoffs are coming imo 

 

[Dinsy Ejotuz]

• Loan quality = very very high.
  
• Supply = low (not inventory, overall supply)
  
• Inflation = very high.
  
• Economy = possibly overheated, no signs of recession at all today.
  

Mortgage rates are slowing sales, but RE prices almost never crash.  2008 was only possible because ALL FOUR of the things above were 180 degrees opposite.

In a recession prices stall or maybe fall back a little bit while time/inflation/lower rates make them more affordable again.

IMO it seems very unlikely prices are going to crash unless two or three of the items above flip again.  It does seem like a ~bad time to buy to me though.  

 

[eoMMan]

With prices on everything, not just lumber skyrocketing, Im not sure you could even build a single family house for less than 200k these days. 

Lumber is actually down double digits (%) this year, believe it or not. 

 

[eoMMan]

• Loan quality = very very high.
  
• Supply = low (not inventory, overall supply)
  
• Inflation = very high.
  
• Economy = possibly overheated, no signs of recession at all today.
  

Mortgage rates are slowing sales, but RE prices almost never crash.  2008 was only possible because ALL FOUR of the things above were 180 degrees opposite.

In a recession prices stall or maybe fall back a little bit while time/inflation/lower rates make them more affordable again.

IMO it seems very unlikely prices are going to crash unless two or three of the items above flip again.  It does seem like a ~bad time to buy to me though.  

No mention of interest rates, eh? 

 

[Dinsy Ejotuz]

No mention of interest rates, eh? 

I said it doesn't look like a good time to buy.

High interest rates don't typically crash home prices though.  Check out the early 80s on the chart down the page there and show me the price crash.  Mortgage rates averaged 17% for part of that period.

They do slow sales though.

 

[Dinsy Ejotuz]

And I'm not saying prices can't fall locally -- like Houston RE during the petro crashes or something.  But it takes a lot.  Just saying that 2006-2008 was very unusual and none of the things that caused it are in place today, so a massive and widespread fall in prices seems unlikely to me.

 

[flapgreen]

• Loan quality = very very high.
  
• Supply = low (not inventory, overall supply)
  
• Inflation = very high.
  
• Economy = possibly overheated, no signs of recession at all today.
  

Mortgage rates are slowing sales, but RE prices almost never crash.  2008 was only possible because ALL FOUR of the things above were 180 degrees opposite.

In a recession prices stall or maybe fall back a little bit while time/inflation/lower rates make them more affordable again.

IMO it seems very unlikely prices are going to crash unless two or three of the items above flip again.  It does seem like a ~bad time to buy to me though.  

No sign of recession at all? 

 

[Dinsy Ejotuz]

No sign of recession at all? 

Nope.  Not today.

You can certainly project out that the Fed might put us in one fighting inflation (and I do agree that's possible), but right now, today, the economy is humming by almost every measure you can find. 

Low unemployment, increasing number of employed, earnings up (nominal), job market is tight, demand for goods may be softening, but maybe/probably on because demand for services is finally recovering post-COVID.  I'm sure you can find something if you're convinced going in that a recession is dead ahead, but right now there's not much to hang your hat on.  And the worry itself is probably a good thing since it might help cool everything off before the Fed goes too far.

And to the degree the Fed does keep being aggressive with rates, and the economy slows, it should undercut some of the input drags on the economy too -- gas prices, supply chains, etc.  Should act as something of brake as far as a deep recession goes.

Way more reason for optimism (talking macro -- there are always winners and losers) than not IMO.  Having said, the economy proves over and over again that predicting it is a fools game and no one ever does it right for very long.

 

[flapgreen]

Nope.  Not today.

You can certainly project out that the Fed might put us in one fighting inflation (and I do agree that's possible), but right now, today, the economy is humming by almost every measure you can find. 

Low unemployment, increasing number of employed, earnings up (nominal), job market is tight, demand for goods may be softening, but maybe/probably on because demand for services is finally recovering post-COVID.  I'm sure you can find something if you're convinced going in that a recession is dead ahead, but right now there's not much to hang your hat on.  And the worry itself is probably a good thing since it might help cool everything off before the Fed goes too far.

And to the degree the Fed does keep being aggressive with rates, and the economy slows, it should undercut some of the input drags on the economy too -- gas prices, supply chains, etc.  Should act as something of brake as far as a deep recession goes.

Way more reason for optimism (talking macro -- there are always winners and losers) than not IMO.  Having said, the economy proves over and over again that predicting it is a fools game and no one ever does it right for very long.

OK. I see where this is going. Someone actually thinks the current economy is going well and also has a list of posts hammering conservatives judges and immigration, various Republicans etc with few to no posts talking about the current folks running the country off a cliff. That's called politics and a person that is blinded by the reality of what's happening right in front of their face, so they choose to focus on whatever the current flavor of the day while keep their head in the sand and acting like everything is humming along just fine. Carry on. 

 

[TwinTurbo]

Zillow and other sites get their listings from the Local MLS.  The MLS feeds them the info. Unless it's a FSBO.

To get on local MLS, a contract between seller and an agent must exist. An agent just can't post a home for sale. If they do post on MLS, and don't upload all of the contracts and listing detail paperwork by end of next day, they can receive a major fine.

Please explain this bait and switch thing.   How exactly are you strung along for showings?   Homes are still selling in 0-2 days. An agent must mark them as pending by end of business next day.

If you want to buy a home correctly, call largest company in that town, ask them for name of the person that runs the largest team, and ask to be interviewed before you go out looking for homes by that team's #1 Buyers Agent Specialist.

The best way I can describe it is that after I click the "contact agent" on Zillow for a particular property, I end up getting contacted by agents that are clearly not the seller's agent. Maybe they work for the same firm as the seller's agent, but they can't get me in to see the property. And I end up getting text messages from these agents going forward wanting to connect about other opportunities. It's really annoying. 

Also in the Detroit Metro area, homes are no longer selling in 0-2 days. Maybe that was the case before the recent rate hikes, but not anymore. It's mostly just price reductions even though inventory is still low. 

 

[FBG26]

• Loan quality = very very high.
  
• Supply = low (not inventory, overall supply)
  
• Inflation = very high.
  
• Economy = possibly overheated, no signs of recession at all today.
  

Mortgage rates are slowing sales, but RE prices almost never crash.  2008 was only possible because ALL FOUR of the things above were 180 degrees opposite.

In a recession prices stall or maybe fall back a little bit while time/inflation/lower rates make them more affordable again.

IMO it seems very unlikely prices are going to crash unless two or three of the items above flip again.  It does seem like a ~bad time to buy to me though.  

I agree with the overall concept that I don't think we'll see a housing crash (maybe minor corrections in some markets), but I'm not sure the comment on a possible recession is correct. Pretty sure retailers like Target are already reporting decreases in consumer spending. I wouldn't be surprised if we were already in a recession. 

 

[The Z Machine]

I agree with the overall concept that I don't think we'll see a housing crash (maybe minor corrections in some markets), but I'm not sure the comment on a possible recession is correct. Pretty sure retailers like Target are already reporting decreases in consumer spending. I wouldn't be surprised if we were already in a recession. 

I think you're right here.  We are seeing petty big jumps in pricing for goods after a long stretch of inputs jumping without commensurate retail price increases. That in turn is affecting consumer spending, which slows down the economy.  

The question is whether that cycle will put us into a recession or rather just slow down inflation enough to tame the beast.

It would very much suck if there was a deep recession coupled with rampant inflation. A whole lot of savings will get wiped out that way...

 

[TwinTurbo]

And I'm not saying prices can't fall locally -- like Houston RE during the petro crashes or something.  But it takes a lot.  Just saying that 2006-2008 was very unusual and none of the things that caused it are in place today, so a massive and widespread fall in prices seems unlikely to me.

I think its very likely. Liquidity is drying up, cash buyers will be much fewer, in addition to rising rates. A lot of people's net worth just took a big hit over the past month with the huge drop in stocks, bonds and crypto. The only thing keeping this going is low inventory. 

 

[Zegras11]

The best way I can describe it is that after I click the "contact agent" on Zillow for a particular property, I end up getting contacted by agents that are clearly not the seller's agent. Maybe they work for the same firm as the seller's agent, but they can't get me in to see the property. And I end up getting text messages from these agents going forward wanting to connect about other opportunities. It's really annoying. 

Also in the Detroit Metro area, homes are no longer selling in 0-2 days. Maybe that was the case before the recent rate hikes, but not anymore. It's mostly just price reductions even though inventory is still low. 

When you click to get an agent, you are clicking for an agent that has paid to be placed there.  That for sure is a lead generation tool.   Imo, your going to wind up with very crappy agents that do this.   Newer agents do this to get started.  

In my first post, I recommend finding a buyers agent that way.   Then when you see one of these that you would like to go see,  you simply text him the address and set up a time.  That way you work with only one agent the entire time and much, much better experience for you.  

 

[Chadstroma]

Do real estate agents still put up bait and switch listings on Zillow and other sites? I have contacted the agents on a few listings and they string me along for showings, then find a reason to cancel last minute, then want to represent me as the buyer's agent for other homes. These are new listings that are up for less than a day or two. I haven't done this in a while and its super annoying. It just seems like old school sales lead gen bs.

Zillow is 100% a lead generation platform. That is what they do. The model use to be to sell leads to realtors and lenders. It has now changed where Zillow is trying to be a realtor and lender too (failing) and keep the best leads for themselves and sell of the rest to the realtors and lenders who don't understand what is happening. Essentially, Zillow has used realtors and lenders capital that they give them to invest in it's goal to replace realtors and lenders. As a mortgage broker, thankfully they are so inept at lending that it hasn't been that much of an impact (yet... who knows if they ever figure it out or not). 

Zillow actually sucks at everything it does. It is the worst for listings because they get all their info from third parties. So something like realtor.com or homesnap which gets their listing information straight from MLS is far superior in accuracy and timeliness. For their "zestimates", they are almost always off by epic amounts. The information on the properties are also known to be 'off'. 

If you contact a selling agent regardless of how about a property then they may try to swing you to look at other properties with them. Why? Money. As a buying agent, they may do a dual agency purchase (two agents from the same agency) but they are only getting paid on one side (unless they are the broker and get a taste from everything in the agency). If they get you as a buyer then they sell that property and then have a new customer for another transaction. 

In reality, you are best off finding yourself a buying agent to work with. They often have a realtor special homesnap search they can set you up with but if you insist on surfing Zillow and want to see a property on there, you simply tell them that you would like to see 1234 Everstreet Ave. property and they will arrange it from there. You have a professional working with you and helping you as well as don't have to do that silliness of what you are trying to work through. 

 

[Zegras11]

Zillow is 100% a lead generation platform. That is what they do. The model use to be to sell leads to realtors and lenders. It has now changed where Zillow is trying to be a realtor and lender too (failing) and keep the best leads for themselves and sell of the rest to the realtors and lenders who don't understand what is happening. Essentially, Zillow has used realtors and lenders capital that they give them to invest in it's goal to replace realtors and lenders. As a mortgage broker, thankfully they are so inept at lending that it hasn't been that much of an impact (yet... who knows if they ever figure it out or not). 

Zillow actually sucks at everything it does. It is the worst for listings because they get all their info from third parties. So something like realtor.com or homesnap which gets their listing information straight from MLS is far superior in accuracy and timeliness. For their "zestimates", they are almost always off by epic amounts. The information on the properties are also known to be 'off'. 

If you contact a selling agent regardless of how about a property then they may try to swing you to look at other properties with them. Why? Money. As a buying agent, they may do a dual agency purchase (two agents from the same agency) but they are only getting paid on one side (unless they are the broker and get a taste from everything in the agency). If they get you as a buyer then they sell that property and then have a new customer for another transaction. 

In reality, you are best off finding yourself a buying agent to work with. They often have a realtor special homesnap search they can set you up with but if you insist on surfing Zillow and want to see a property on there, you simply tell them that you would like to see 1234 Everstreet Ave. property and they will arrange it from there. You have a professional working with you and helping you as well as don't have to do that silliness of what you are trying to work through. 

The agents that spend money on Zillow to generate buyer leads are the dumbest agents in the industry and don't understand they are feeding someone that wants badly to replace them.

The consumers that use these agents from clicking on a zillow agent placement are going to have a bad experience prbably 10x more than any other way of finding an agent.   Call a local office or two and interview a few agents that specialize in the area you want to buy or sell.  I do a 90 minuted meeting with anyone that wants to buy a house with me, and I won't do it until they have been approved by a lender and have an approval amount.

 

[TwinTurbo]

Zillow is 100% a lead generation platform. That is what they do. The model use to be to sell leads to realtors and lenders. It has now changed where Zillow is trying to be a realtor and lender too (failing) and keep the best leads for themselves and sell of the rest to the realtors and lenders who don't understand what is happening. Essentially, Zillow has used realtors and lenders capital that they give them to invest in it's goal to replace realtors and lenders. As a mortgage broker, thankfully they are so inept at lending that it hasn't been that much of an impact (yet... who knows if they ever figure it out or not). 

Zillow actually sucks at everything it does. It is the worst for listings because they get all their info from third parties. So something like realtor.com or homesnap which gets their listing information straight from MLS is far superior in accuracy and timeliness. For their "zestimates", they are almost always off by epic amounts. The information on the properties are also known to be 'off'. 

If you contact a selling agent regardless of how about a property then they may try to swing you to look at other properties with them. Why? Money. As a buying agent, they may do a dual agency purchase (two agents from the same agency) but they are only getting paid on one side (unless they are the broker and get a taste from everything in the agency). If they get you as a buyer then they sell that property and then have a new customer for another transaction. 

In reality, you are best off finding yourself a buying agent to work with. They often have a realtor special homesnap search they can set you up with but if you insist on surfing Zillow and want to see a property on there, you simply tell them that you would like to see 1234 Everstreet Ave. property and they will arrange it from there. You have a professional working with you and helping you as well as don't have to do that silliness of what you are trying to work through. 

Thanks @Chadstroma. After my recent experience, I was ready to short Zillow stock but it looks like I'm late to that party already. I just assumed that contacting the agent or requesting a tour for a newly listed property would connect me with the selling agent for that property. Otherwise there is no point to their entire site. But this is worse than Craigslist. I would be better off driving past the property and just calling the phone number on the sign, which is what I ended up doing. 

 

[TwinTurbo]

When you click to get an agent, you are clicking for an agent that has paid to be placed there.  That for sure is a lead generation tool.   Imo, your going to wind up with very crappy agents that do this.   Newer agents do this to get started.  

In my first post, I recommend finding a buyers agent that way.   Then when you see one of these that you would like to go see,  you simply text him the address and set up a time.  That way you work with only one agent the entire time and much, much better experience for you.  

I just ended up calling the phone number of the actual seller's agent (from the sign outside the house) and they called me back same day and scheduled an appointment. That will be the last time I ever use Zillow. 

 

[culdeus]

I just ended up calling the phone number of the actual seller's agent (from the sign outside the house) and they called me back same day and scheduled an appointment. That will be the last time I ever use Zillow. 

Wait, what? This is not a good idea.  You need an agent on your side. 

 

[Chadstroma]

Wait, what? This is not a good idea.  You need an agent on your side. 

Agreed. 

I have been involved in a lot of RE purchases including one without any RE agents involved (I bought a property from a close friend). I have been dealing with RE through lending fir years and I would not even try to do this. Plus, most selling agents won't even talk to you unless you are represented unless they are trying to get a dual agency done (which most will). Get a RE agent that is yours and that looks out for your interests. They do work on your behalf (like contacting listing agents to set up viewings) and you don't pay them- thr seller pays them. 

I really don't know why anyone without a RE license would insist on trying to do it their own. 

 

[Chadstroma]

This post has had a lot of positive feedback so I thought I would share again... 




#1: The difference between retail and wholesale. Retail is your banks, credit unions and direct lenders (some big direct lenders would be Quicken, Guaranteed Rate, Fairway, etc). Wholesale is your mortgage broker. I shouldn't have to tell you which is going to end up giving better rates and cost on average. 

#2: The bigger the Bank the more they usually suck. UNLESS you are your typical FBG rolling in cash. If you are, then the big and regional banks that have wealth management departments will be very aggressive in offering jumbo loans. They basically use it as a loss leader. They will give you a great deal and then get you into their wealth management where they make all their money off of you. When it comes to mortgages, a jumbo is pretty much the only time you want to talk to a bank. Otherwise, avoid banks though sometimes your smaller banks will have a pretty good deal.  

#3: If you see them advertising on TV, I promise you, they suck. Quicken spends ridiculous amounts of money on advertising. Why? Because the people who don't know better who have done loans with them before and almost always got bent over are paying for this marketing machine. Plus, they are pretty much the slimiest lender out there. Over and over and over again hearing clients tell me "they said X to me" and in reality it is "Y". They also typically will start off with what seems like a great rate and then charge 3 points in origination charges. DO NOT go to Quicken (aka Rocket Mortgage) or one of the slim ball VA lenders like Veterans United or New Day. 

#4: I love credit unions. Huge fan of them. I belong to two of them. CU's are usually your best bet for checking, savings, car loans, personal loans, equity loans or lines, etc. However, one area that they are not usually your best bet is mortgages. The reason is mostly about scale. There are some large CU's but most are still relatively small. They do not do enough volume to be efficient and the large loan amounts take a big chunk of their reserves. Go ahead and check with your CU, they can offer some good deals, I have seen it and they will still tend to beat banks and direct lenders but not usually the best bet. 

#5: Rate is not the end all be all of doing a loan. You have the rate which of course is important but there are also fees and origination charges. A typical game that is played is showing a great rate but then when you compare to another lender you see that you are really PAYING for that great rate. Often times as a broker, I am able to match the rate and give a credit versus the origination points they are charging. Be mindful of that. 

#6: Use the Loan Estimate! Wherever you go, when you get the Loan Estimate, shop it to other lenders. You can just send it to the lender and let them come back with their offer or you can put more work in it and just shop and compare rates. What happens if you do? Worst case, you get the peace of mind that you are getting a good deal. Best case, you save yourself thousands of dollars!

#7: Your current lender is not going to make it easier than going to another lender. They will need to get all new docs or if it a streamline another lender can do a streamline as well. 

#8: Unless you hate yourself and want to throw your phone away forever do not go to a website that 'shops' loans. First of all, they don't really. All they are doing is selling the leads to lenders. Second, you will get bombarded by phone calls and wish you never even heard of Lending Tree or whatever else. 

#9: Always shop lenders. Mortgage brokers do the shopping for you accessing multiple lenders and getting wholesale pricing. 

#10: Don't make assumptions about what you can or can not do with a refinance. Talk to someone who actually knows. They can go over your options after figuring out your situation and your goals. I have seen some bad thinking in here that is costing people significant money. 

#11: The better your credit score the better your rate. You are going to top out around the 740-750 area. So, don't worry about getting an 800 credit score. 

#12: If you have more debt other than the mortgage/equity loan or line then you might be better off refinancing all the debt into the home. 

#13: DO NOT listen to Dave Ramsey when it comes to mortgages. He is a dolt when it comes to mortgages, gives horrible advice and then sends his followers to Churchill mortgage because he gets paid advertising from them. It disgusts me. People trust him and he sends them to a crappy retail lender because he gets a big check from them on top of giving really HORRIBLE advice that ends up costing people tons. Just ignore him when it comes to mortgage advice. 

#14: If you are getting a mortgage, don't do anything stupid like deposit a bunch of cash into your account or buy a new car or change jobs. Anything to do with your job, credit and income can cause problems for the loan. Yes, I don't care if you are doing the same job for more money- I can't close your loan on time now. (real life situation, I was able to save the loan but this ding dong couldn't get through his head that most lenders would have killed the deal and it was all our fault somehow that we couldn't close on time). 

#15: Realize that the vast majority of down payment assistance programs are pushed by lenders who do them and realtors who want you to buy a home with them as free money is NOT. Why do they pitch it like that? Well, why wouldn't you use a lender or realtor who is offering you free money?! This is the way that most of them work... they are set up to give money in a form of a forgivable loan or silent second or another such form. You must keep the loan for an extended period of time 5-7 years is most common. Once you do (meaning you can not sell or refinance that loan) then you are free! Here is the thing... that 3-3.5% of the purchase price that they gave you jacked up your rate. I have calculated the differences- not from different lenders but from lenders that I know using a program, the rate you would get with them without the DPA and the rate you get with it... and let's say you got $10K from them... that $10K ends up costing you $30-40K over the period that you did PLUS potentially an opportunity cost of refinancing as I have done for all my clients who listened to me last year and now that rates have dropped are realizing large savings. There are true grants out there (where there is no ties to the money) but most of these also have a higher rate. I have access to some of these programs but only have done one in the last few years and that was after being sure to explain everything in detail and the real cost to the client (side not, the plan was to refi them later which we plan on doing in a couple of months). 

#16: If you are veteran, first responder, medical profession- the great sounding program (Homes for Heroes is the largest one) where you get money back isn't as great as it sounds. I promise you. The realtor part of it is actually a good deal for you but the lender side where they typically pay for your appraisal (around $400-600) is likely costing you a ton of money in the rate and cost of the loan. These are usually retail lenders who have lot's of extra cash (there is a reason why they have to charge higher rates and fees/origination) that pay into these programs, which are relatively expensive (for a lender about $1800 a year for Homes for Heroes just to be part of their program and that is it). You can still shop the lender. DO SO!

#17: First time home buyer programs are usually marketing schemes. There are some benefits offered if you are doing a conventional loan which anyone can have access to. Other things are usually the DPA programs (see #15)  and should be avoided. Your third cousins best friend's dog's breeders brother who got $10K free money to buy a home is more times than not money that cost them. 

#18: Most loans over 80% loan to value that doesn't have mortgage insurance is costing you in a higher rate. If you are doing conventional loan, you can get rid of the MI later. If it is baked into the rate it is there for life of the loan. 

#19: FOR THE LOVE OF GOD AND ALL THAT IS HOLY if you are building a home PLEASE understand that the builders preferred lender that they are going to give you $10K in free upgrades for using them is going to cost you much more money than the $10K they are 'giving' you. Here is how this scheme works. The free upgrades actually are going to cost them maybe $2K if that to do. In return for you using their preferred lender and getting absolutely bent over they are going to get a nice big fat check worth alot more money. The builder and the lender will laugh at you sitting in the model house counting your money you just forked over as they watch you move in. 

#20: A realtors 'preferred lender' can be good or can be bad. There is no way to tell. Here is how it works in the industry. Retail lenders who tend to charge more have bigger budgets to spend on marketing. They will 'partner' with realtors and pay for the realtors marketing (also sponsor things like their meetings, or holiday party, or conferences or whatever else) and in return the realtor makes them their 'preferred lender' so the realtor will refer you to them when you are not already using a lender. Now, you can also have 'preferred lenders' that don't do that stuff and the realtor has found them to be a good lender. (side note here, in the average realtors eyes, a good realtor is one that closes deals and does it on time and not so much about rate and cost) For example, I am several realtors 'preferred lender' but do not spend money on them and it is really based on them knowing I can get more loans approved, close on time and give their clients great deals. Overall, NEVER get loan advice from a realtor unless they are the rare ones that are licensed for lending and actually know what they are talking about (that is significantly less than 1% of them)

#21: You don't need 20% down. Don't keep waiting to buy when you are spending money away on rent. Every month you pay someone else's mortgage (paying rent) is money you will never see a dime of again. As an owner you are building wealth. Think of it this way... landlords are landlords for a reason. They are not losing money and on top of it are gaining equity. For most Americans, their 'wealth' is almost exclusively in their homes. Not retirement accounts or stocks etc but built up equity from paying down principle and appreciation of their homes which is historically pretty consistently 5% over periods of time (including booms and crashes). 

#22: You don't need perfect credit to get a mortgage. You can do a FHA loan with a minimum credit score of 580 with as little as 3.5% down of the purchase price. 

#23: When picking a good realtor find out these things about them: A) Do they do this as a full time job or is it a side gig or something they do when they are bored etc. You want a full time realtor for the experience and focus. Trust me. The exception on this would be a semi-retired realtor but honestly, they are usually ones to pass on as well. You want someone who knows the market, is sharp on negotiation and has good contacts. B) How long have they been doing the job. Experience counts for sure. But I rather go with a rookie doing it full time than someone been doing it 10 years as a part time gig. C) What is their availability. You want someone that will be available on your time tables and not theirs. D) How many houses have they sold or closed on? It will give you an idea about how productive they are. But keep in mind, someone who isn't as productive might be hungrier and more flexible to you versus someone who is doing tons of volume. 

#24: Always get an inspection done from a good inspector. Do not skimp here. A good inspector will give you very important info on the home even if there is nothing to be concerned over and potentially catch a very big problem. Keep in mind even the best inspectors will not be able to find out anything and everything wrong with a house. Find out of they do mold and radon testing or not and if it is extra if they do. I would go ahead and do it. Keep this in mind, this is usually the largest financial transaction of your life so far. Do you want to be penny wise and dollar foolish on it?

#25: If you are military or a vet. Run away from supposedly veterans lenders like Veterans United and New Day (and more but those are two big ones) THEY SUCK. Even good places like USDAA (who does insurance well), Navy Fed, may do a lot of good for vets in other areas but are not the best in mortgages. 

#26: As I will get to soon... brokers are better. This is true for insurance too. I see insurance quotes often and I personally did my own shopping where I shopped 10 carriers plus one insurance broker. The broker easily won out. Plus, the big carriers suck if you end up with a claim. I have a whole personal story about Allstate sucking big hairy monkey balls. On top of it all an agent at a large carrier has NO sway on anything on a claim. A broker actually does (as counter intuitive as that seems) because they can tell the insurer that if they don't do something right that he will not send that insurance company any more business. The captive agent has no choice. 

#27: If you are in a rural area, check out a USDA loan. You can finance up to 100% but keep in mind, you actually might end up better served doing a FHA loan depending on specifics. 

#28: Brokers are better. They weren't always... they use to be a pack of scumbags and slimballs who would screw over their own mothers for an extra 20 spot. Before 2008 I had plenty of chances to be a broker and would not even though I would have made 3 or 4 times more than I was making because again the vast majority were nastier than moldy dog poo with worms in it. That being said, even back then you could get a better deal from a broker IF you knew what you were doing and could protect yourself. Otherwise, you could get screwed so badly that it would make going to Quicken seem like a good deal. In fact, I actually used a broker on both of my home purchases even though at both times my wife and I worked at banks. That is right, when bankers want to do their loans- you know who they come to? Brokers. Things have changed and really the consumer advocates are now brokers and the things they use to do before that would screw people over are things that can not be done now. Not only are you going to get a better deal at a broker the vast majority of the time but you are also not going to get screwed over. Plus they have options that banks, credit unions and direct lenders don't have to get you approved if you have a harder to finance situation like a business owner, bad credit, recent major credit event (foreclosure, bankruptcy, etc) etc. Also, brokers can close quicker than other lenders on average. How do you find a broker? Well, you can ask me, I know brokers throughout the country. I have no problem connecting you to one (and if you are wondering, by regulation and the risk of losing my license, I can not get paid for referring you to a broker... it is purely out of help you out) or if you want you can check out www.findamortgagebroker.com oh... and if you are in Illinois, I can help you directly. 

#29: You are not locked in to a lender with a pre-approval. Unscrupulous lenders who tend to overcharge will have a lot of nasty little tricks that they do to keep you stuck with them. Fear is one of the big ones backed with lies. That fear will be to tell you that you can not change lenders once you have an offer accepted from a pre-approval or you can lose your earnest money. FALSE! Or that you will end up not being able to close on time with another lender (a favorite of retail loan officers to say about brokers when broker turn around times are actually quicker than retail). Your Loan Estimate is provided to assist you as the consumer to not only better understand the true costs of the loan but to be able to shop your loan around or the best options for you and then be able to compare them as close to apples to apples as possible. Don't let liars overcharging you win!

Hope this helps guys. I am always willing to help out if you have any questions or want to connect with someone licensed for your state. Just DM me. 

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[TwinTurbo]

Wait, what? This is not a good idea.  You need an agent on your side. 

Why? 

 

[FBG26]

Wait, what? This is not a good idea.  You need an agent on your side. 

Why? 

Because the listing agent can't tell you "I think the house is only worth X". They are looking out for their client's best interest, not yours. You need somebody that can advocate for you and is looking out for your best interest. You should have your own agent that can show you lots of different houses, which is what several people have been saying. 

 

[Chadstroma]

Yesterday a fairly large non-QM lender, Sprout Mortgage, abruptly closed it's doors. This is not very surprising at all to those of us that pay attention to mortgage lenders such as brokers like me. Sprout had both retail and wholesale operations. The big 'tell' that they were not on good financial footing was in the early days of COVID when they stopped funding loans without notice for a period of time. Non-QM loans (loans that do not qualify for conventional or government backed loans and are for one reason or another not considered QM = Qualified Mortgage, which essentially provides lenders safe harbor) did basically stop for a period of time but most non-QM lenders honored the existing locked loans while Sprout did not. That mean that then there were situations where people were literally waiting for the closing docs to sign at the table and then suddenly there was no loan.

Why did they fail and what does that say about the RE market? As shown in the early period of COVID when they just stopped funding without notice, the company was not healthy financially even though that was a very unprecedented situation, other lenders were able to more gracefully stop funding. The reason why non-QM lending stopped funding was that the funding for them dried up. When the markets start to look bad then investors don't want the riskier mortgage loans and stop buying those up on the secondary market. After the initial shock of COVID, what followed was a massive refinance boom that propped up a number of 'weak' lenders and kept them going as lending was easy and plentiful. Now with the RE market slowing, rates rising and investors nervous about the future, Sprout simply could not continue to operate. It was reported there were a couple of investor deals to infuse them with $25 million but those deals fell through and Spout closed it's doors. The thing this failure was not from was loans defaulting. The RE market is slowing in pretty much all markets. "Slowing" is very much a subjective term as the market was going 120 MPH before and the gas has been taken off the pedal and the speed is lowering getting closer to the posted speed limits of what would be considered a "balanced market". 

 

[Buck Bradcanon]

Anecdotal I suppose but my GB is a real estate agent in Austin.  I pinged him yesterday and this was his response.

"Screeching halt in Austin.  Crazy.  In 2 months our MLS has gone from 2,000 listings to 9,000 listings today."

 

[Capella]

Anecdotal I suppose but my GB is a real estate agent in Austin.  I pinged him yesterday and this was his response.

"Screeching halt in Austin.  Crazy.  In 2 months our MLS has gone from 2,000 listings to 9,000 listings today."

Yea my zip code has gone completely cold. It’s crazy. Things were selling within literally 24 hours and now everything is just sitting there. Haven’t seen a pending in weeks. 

 

[Osaurus]

Yea my zip code has gone completely cold. It’s crazy. Things were selling within literally 24 hours and now everything is just sitting there. Haven’t seen a pending in weeks. 

Same here in Riverview. Open house for a 1 story down the road maybe had 6 cars pull up all day. Two months ago they wouldn't have needed an open house at all.

 

[Capella]

Same here in Riverview. Open house for a 1 story down the road maybe had 6 cars pull up all day. Two months ago they wouldn't have needed an open house at all.

Yea it’s wild. A house on my street a few months ago sold on the same day, hours after listing. Now one has been there for 3 weeks. 

 

[ChiefD]

Same here in KC.

 

[The Z Machine]

Do you guys think this is higher rates, risk of recession, or something else?

I'm not sad that things have slowed way down.  Prices were on a crazy run.

 

[The Z Machine]

I have friends that closed on their place like 6 weeks ago and just listed their old house at a fair price.  I don't think they've gotten much love.

They will likely rent out their old home is it doesn't move soon.