Homebuyers, they are messing with the QRM…WTH is a QRM?

OK, so you are doing your best to stay up with all the things that will impact your ability to buy a home. You are fast discovering you don’t know what you don’t know and in some cases you aren’t really sure you know what you think you know. There must be seventy trillion different bits and pieces of information available on-line (give or take a trillion) and once you dive into the information pool, you realize it only has a deep end. Soon after you are swimming it becomes apparent that the water below the surface is murky. Nothing is really quite clear beyond your desire to buy a home and avoid mistakes in the process.

The latest acronym being bandied about is QRM. Sure, it sounds like something out of a high finance international meeting press release. It simply stands for Qualified Residential Mortgage. It is a measurement of the types of loans offered to consumers when purchasing a home.  You are correct in assuming that it was not a subject of much conversation during the crazy mortgage days before the crash in real estate.

One of the outgrowths of the crash ( aside from every mortgage lender denying any culpability in what occurred) has been for the Government to determine what types of loans they will guarantee in the future. In the old days, everything was covered. If you wanted an interest only loan… no problem. Looking for a loan with minimal payments for a period of time with an outlandish balloon payment later on…step right up. Looking for a negative amortization loan (the amount you owe begins increasing the day you sign) … come into my office. Hello easy money….hello housing market crash….hello – what the hell just happened?

Of course, the terms were explained and of course people signed on. The loans were being offered by reputable institutions weren’t they? People wanted to buy a home and they wanted payments they could afford (so they thought). The problem was that ugly truth beneath the surface. People were given loans they could not afford and lenders made the loans because there was no risk…they were insured by the Feds. (Oh damn, the Feds are really just all of us and our tax dollars…oops!)

Well now they are putting together a comprehensive picture of a qualified residential mortgage (QRM). Recently, they decided to offer what they have so far for comment before it becomes a rule. If it passes muster, a borrower will have to make a down payment (right now the range is between 5 and 10%) and the borrower’s debt to income ratio can not be higher than 43%.

If you fall outside those marks, the bank will be required to keep your loan. Banks don’t have all the money because of your deposits, nope, they like to make loans and sell them off. If the new rules were too strict, banks would back off loans faster than I step away from guacamole.

There are other alphabet soups designations floating around as well QM, FDIC, etc. If you need help navigating the market and understanding all the things that actually will impact your home purchase, give me a call.

I am not an amateur and I am not a part-time participant in the fray. I do this for a living. I make sure that I am up-to-date on the issues that impact your process and I stay close to the things that impact neighborhoods in the area, right down to the house on the street where you want to live.

You can reach me at 301-509-5111. It never hurts to have a guide when wandering through the uncharted waters of life.

50 years, what have you done for me lately?

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This year we mark the 50th anniversary of the 1963 March on Washington. Newscasts will be filled with sound bytes and clips from the hot August day. Interviews will take place with those that were there then and have returned to celebrate the anniversary.  For a few days, hope will be rekindled and visions of the “dream” will be revived.

I was just a teenager in 1963. Living in the suburbs, I was well aware of the march. I had a vague notion about the reason for the march. Bob Dylan was going to perform and that was enough for me.

I went to see Bob Dylan. I was part of the crowd. I was swept up in the humanity and the common desire to be treated equally was palpable. Sure, I listened to Dylan sing but I heard the pain, passion, pride and promise in King’s words. I went to enjoy and afternoon of folk music and left with my eyes wide open to the disparity in treatment others were receiving.

I was a teenager. I knew little of the struggle. I lived in the DC area. All of the sudden I was aware of the signs (“colored only”, etc) that were plastered in various establishments. I became acutely aware of the actions of people in Mississippi, Alabama, Arkansas and all the other “Dixiecrat” southern states.

When your father writes for one of the largest newspapers in Washington, DC, you have a front row seat to the events that occur all around the country.

I have spent the last 50 years doing my best to be fair to all. I have not done enough. Oh, it is not because the desire is not there. There is nothing I can do to remove the dark stain on the soul of those that still believe they are superior. There is nothing I can do that will erase the stigma of hundreds of years of inequality.

50 years later and black people still face economic struggles. They still are labeled because of the music they create, the clothes they choose to wear and the way they communicate with one another.

A liberal have baked society points to President Obama and declares his election was proof that times have changed. Really? He barely won the election and the undercurrent on the losing side was patently racist. What are the other signs of progress?

Fair Housing? Sure, there are laws governing fair housing, but what has been done for those that can not ever afford to purchase a home? In our Nation’s Capitol, we warehouse the poor in the old Saint Elizabeth’s hospital.  Somehow, the NAR has convinced the media that a big part of the American Dream is to own a home of your own. It’s a lie. We still have thousands upon thousands of Americans who dream of just having a home. Ownership is not the issue.

Voting Rights? OK, we passed a lot of laws to protect peoples right to vote. Recently, the Supreme Court determined that once again the States could decide how to implement access to enfranchisement. It did not work when “jim crow” was the rule and it will not work now. Beyond that, states continue to gerrymander election districts in a fashion that leaves the poor lumped in small sections. Not surprisingly, the poor have a larger percentage of people of color than vanilla wafer folks.

50 years, what have you done for me lately? How long will I have to carry this sign.

i am a man

 

 

 

Important Notice

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Lourdes and I have joined Century 21 New Millennium on Capitol Hill in DC. Although many of the posts in this blog indicate we are working under the broker Frankly Real Estate, we have changed brokers. We are currently in the process of changing all the references that are no longer accurate. We apologize for any confusion and promise that very soon, all broker references will be correct.

Century 21 New Millennium 1000 Pennsylvania Avenue SE Washington, DC 202-546-0055

Now, I get it …

The District of Columbia began to recognize same sex marriages. There was much consternation, but couples were married and life moved on. This year, the State of Maryland began recognizing same sex marriages. Those opposed shared tales of doom, but couples got married and life moved on.

Personally, I have been able to marry the person I wanted to marry and felt that everyone deserved the same right. I have family members that were in same sex relationships that traveled to another state to marry (at that time, they could not do so here).

It was no big deal. People closest to them had already accepted them as a couple. When family and friends are happy, most of us don’t even notice that their partner is the same sex. Usually, we have bigger fish to fry (like who will be stuck doing the dishes after Thanksgiving dinner). I was happy for for them. It was just another milestone, like any other event that occurs in your family.

Then, a couple of weeks ago, I attended a wedding of two friends that had been together for over 20 years. It was like any other wedding, good food, good music and lots of catching up with friends. It was a celebration.

Then came time for them to share vows. The officiant turned and said, “Andy, do you take Tomas to be your lawful wedded spouse” (or something like that, it was a wedding and I wasn’t paying close attention). He replied “I do” and in an instant I realized this is so much more than a legal union.

The words had barely escaped his mouth and Tomas began to weep. His shoulders heaved and he turned his back and shook. At first, I thought ‘tears of joy” and then he turned back to us and shared “I never thought I would live long enough to hear those words”.

Now, I get it.  Freedom to openly be who you are and free to marry. Freedom from years of exclusion and oppression. Freedom to enjoy the same rights as everyone else. Freedom to step up and “legalize” a relationship that has existed for so many years.

Consider living under a cloud cover for year after year after year. Then one day, the sun bursts threw and casts a brilliant warm light on you. No longer doomed to the fringe. No longer going through each day without even casting a shadow to validate your existence. Free to be who you are with your soul mate, your partner, your best friend. Now I get it.

I thought I understood. I have never walked in their shoes. I just accepted them as Andy and Tomas, my friends. I do not know all that they have faced, nor do I know the challenges that lay ahead. I do know that the piece of paper certifying the marriage is a by product. They now can legally share all the good and bad marriage has to offer. They have been doing that behind closed doors for too long. They deserve their day in the sun.

Now I get it.

The reason …

Gosh, there must be thousands of real estate agents in the DC area. There are those that practice the craft full time and an even greater number that dabble on a part-time basis. There are men and women from every sort of background. The easy access to a license has forever created this large melting pot of self employed entrepreneurs seeking their piece of the pie.

I would imagine every single one of them has a reason why they became an agent. In conversations I have had with agents, the reasons range from the lure of a high dollar income to I had to sell my mother’s house so I got a license and a fascinating array of life situations that instigated their pursuit.

Consumers should have an inkling of why the person representing them chose to be an agent. It is not the only factor, but motivation surely is a significant factor when attempting to evaluate someone you are hiring to do a job for you.

I won’t speak for anyone other than myself. I can not pretend to know what events or reasons motivated anyone else. I know my roots and I know why I am here and why I have chosen to be an agent.

The reason.  Becoming a real estate agent was not the end goal for me. This profession allows me to follow the admonition of some of the incredible people that molded my core beliefs. I readily admit, I am a child of the 60’s.  I grew up in Washington DC.  I came of age during “Camelot” and the Kennedy administration. The civil rights movement transpired before my eyes. Martin Luther King, Jr spoke directly to the problems that festered in the North and South, in the East and West. He addressed the inequalities that existed in large cities and in rural hamlets throughout America. And when he spoke, I listened. I knew he was speaking the truth. (The oppressed can only point to results, the oppressors are privy to the mindset of those that do the oppressing. Simply put, white people readily shared their bile and hate for minorities  among one another. Publicly they all said something quite different.) Then another voice came into my world.

Bobby Kennedy was a light in a universe filled with darkness. He was a man born into privilege, that refused to allow his station in life to define him. He took on Joe McCarthy, the mob, the Viet Nam War and the rampant socioeconomic inequalities in America. He challenged us more than John Kennedy’s throwing down the gauntlet in his acceptance speech (“Ask not what your country can do for you. Ask what can you do for your country”). He envisioned a clearer picture of tomorrow that went beyond MLK Jr’s powerful promise ( “No, no, we are not satisfied, and we will not be satisfied until justice rolls down like waters and righteousness like a mighty stream.”). Bobby Kennedy was best described by brother Ted, “This is the way he lived. My brother need not be idealized, or enlarged in death beyond what he was in life, to be remembered simply as a good and decent man, who saw wrong and tried to right it, saw suffering and tried to heal it, saw war and tried to stop it.”

The reason? As a real estate agent, I am an active participant in facilitating the dream of home ownership. I am an advocate for my clients. I am in a position to make sure they are treated fairly and should something go awry, I can direct them to the proper channels. It is not a major undertaking. It is helping others. It is being able to focus on my clients needs. It is continuing to philosophically march with the thousands that demanded freedom and equality. I am not just a real estate agent, I am an agent for change.

The reason. I believe that what I do matters. I can not change anyone else. I can not force anyone to open their mind. I can champion equality. I can use the skills I have garnered to assist those in need. Every interaction offers the opportunity to lead by example. It may seem like I can not change the world, but I can impact my little portion and in just changing a tidbit, I believe you actually change the whole.

The reason. When my time here is done, I will joyfully recall, I did my best to leave this place better than I found it. So there you have it. I do this because I believe.

How can I help you?

Internet access stymies Blacks and other minorities

In a study, conducted by the Urban Institute for the Department of Housing and Urban Development, it was determined that Blacks and other minorities were shown 17% fewer homes than whites. Based on the results of this study, claims are being made that Blacks and other minorities are still being discriminated against when seeking housing.

While I have no problem accepting that racial prejudice still exists in our society, I think the study comes up with a pre-conceived conclusion. 

The methodology used was to have two sets of “testors” call about property. White testors and those testors perceived (?) to be white were advised of 17% more properties than those that were a minority or perceived (?) to be a minority. The initial inquiries were made via the telephone. There is no indication that those tested were asked “did you think I was white or did you think I was a minority?”. 

Ivory tower investigations often lead to easy answers.

I am a Realtor. I get phone calls regarding listings. My first thought is not and never has been “Hmmm, I wonder if this is a white person on the phone?”. I am like just about every single agent I have ever known when it comes to a phone call. I am attempting to develop a relationship as quickly as possible. You see, we agents don’t make a dime unless we represent a client. A phone call on a listing is considered an excellent opportunity to garner a client and represent them in a sale. 

We are not trained to be concerned about their race. Agents are trained to gather information about the listing in particular and then gently pre-qualify the caller. Pre-qualification usually includes questions such as “Are you working with another agent?” (We have to follow the Code of Ethics and pirating someone else’s client is a big no-no.), “Have you spoken with a lender to determine how much home your are comfortable buying?” (There is little value in working with someone that can not afford a toaster much less a home.), “When are you available to visit homes that interest you?”(Determining when you can meet at the potential clients convenience is an important step in securing a face to face meeting.).  If possible, I try to determine the style, size and location that interests them. This process is not a secret. It is how we create clients.

The phone call is a battle of interests. The caller wants to see a home. The agent wants to develop a relationship. The success of both parties demands that the caller be focused on what they want to see and that the agent “gently” attempts to pry information that can be used in ‘bridge building” as the relationship continues.

Here is the thing that is not mentioned in the report. Almost all consumers go to the internet as their first source of home search. You can find homes for sale via a computer, a lap top, an assortment of “pads” and on your phone. Agents no longer control what is available. In most cases, we are told what the consumer wants to see. As the relationship develops, a client my focus on using one of our search instruments, (DC area search engine) but even then, the world wide web beckons and most venture through a multitude of sites looking for that perfect home.

Another thing overlooked in the report involves why some people were not shown as many homes as others. Most sources indicate that third party sites have an error rate of about 15%. This is not intentional and it is caused by the way various sites either upload their data, gather their data or in some cases it is the fault of bad data (GIGO- garbage in – garbage out). If someone is just using third party sites to create their wish list, they may ask to see homes that are not available. It happens.

I would love to see a study done on the use of the internet. Break it down by race, income, etc. You might discover that the results of studies like this actually point to problems deeper than the one suggested.

The article regarding the study in Inman News was interesting.(Read the article) I think those that point the finger at agents are taking the easy way out. It is interesting that there is no mention of any action being taken against any agent. No punishment, no penalty, just results tabulated in a think tank and assumptions made by people that don’t do this for a living every day.

I am a Realtor. I don’t care on bit about your race, color, national origin, sexual persuasion or any other personal identifier. If you want to buy a home, just let me know how I can help you. I don’t have the time or inclination to do anything else. I do this for a living and that requires that I actually represent clients. 

Oh, I will be glad to send you every home that meets your criteria. I will review each listing to determine if it truly meets your needs. I will share the same thoughts with anyone that calls. The only caveat in my offer involves the location you may be seeking and the price point you may be able to afford. I have to feel comfortable with the area that interests you. If I don’t know the area, you should use an agent that works in that area. As I mentioned, this is my profession. My compensation is directly related to the value of the transaction. I only develop relationships with clients that are pursuing real estate that will in the end pay me a living wage. Every agent has different thresholds and every agent has the duty and right to place a value on the service they offer. Neither of the caveats has anything to do with who you are as a client.

Realtors are not the bad guys. This study does not appear to dig deep enough to provide that conclusion.

Real Estate Services Cost Too Much

That is not a very popular statement within the real estate industry. And, to be fair, I can only speak to the costs incurred by consumers in Maryland and Washington DC.  Let me also add that I, as an individual agent, am powerless to change them. I should also add that the services I am referring to are those provided by real estate agents. While the cost for other services (mortgage origination, home inspection, settlement, etc.) vary from provider to provider, I don’t know enough about their cost structure to honestly include them in this piece.

Real estate services (in home sales) are paid primarily out of funds that transfer from the buyer to the seller at closing. In sales that involve a listing entity (either a broker or a builder) the amount of monies paid are dictated by the listing agreement between the seller and their broker (in new construction, the broker is often just another division of the builder’s corporate umbrella).  All commission rates are negotiable.  For as long as anyone can remember, individual home owners, wishing to sell their home have been presented with a commission rate of 6%.  This rate is not set in stone. It just happens to be the rate that almost every major broker begins and ends their negotiation.

There are federal laws prohibiting brokers from colluding with one another to set any rate. Most of them just happen to (wink, wink) offer the same basic rate.  The figure is so entrenched in the public’s consciousness, any deviation is referred to as a “discount” rate. Within the industry, those attempting to offer a rate below the “standard” are viewed in a negative fashion. The actual rate that consumers end up paying does vary. It is usually somewhere between 5% and 6%.

It has always been that way.

Ask any of the major brokers why the 6% figure is etched in proverbial stone and they will immediately share there is a cost to providing the services and over time it has averaged out and in order to do the things necessary to sell a home, it will usually cost 6% (this includes legitimate profit that any business has a right to seek).

There was a time when an agent listing a home in this area did have significant cost associated with the sale of the home.  Regardless of broker affiliation, an agent had to create several copies of the disclosures signed by the home owner. The agent had to make several copies of the listing to place in the loose leaf binder listing book that would be available to potential buyers that visited the office. The agent would have to create and print brochures to be placed in the home. The agent would have to order a sign to be placed on the property advertising it for sale. The agent would have to have extra keys made for the home to facilitate viewings. The agent would have to place a lock box on the property. The agent would have to design, print and mail postcards announcing the availability of the home. The agent would have to place ads in the Washington Post and local papers. The agent would have to hold open houses so that potential buyers could view the home. The list goes on and on. In addition, the listing agent has to share a portion of the commission with the agent that is representing the buyer of the home. (Strange. The seller has always been asked to compensate the individual that is working hard to have their client purchase the home for the least amount of money and under conditions that are favorable to the buyer.)

Times change. Commission rates remain the same.

The internet has changed the landscape significantly. There are no more loose leaf binders. As a matter of fact, the need for anything printed is fast dissolving into bits and bytes saved in clouds. The signs placed out front and the lock box on the door are re-usable items. Of course, they have a shelf life, but the cost is not a one time – one use event. Ads in the Washington Post and any other publication are done online (if they are done at all). Every broker has the ability to syndicate the listing of a home in literally thousands upon thousands of websites. It is one of the side benefits of being a member of the local multiple listing service. List is once and the information becomes publicly available all over the world.

Times have changed. The cost incurred by an agent selling a home should have decreased. (I do accept that as much as it would seem that costs for manufactured goods should decrease with the increased use of robots and overall costs for many things that should go down….they don’t. Savings from cost cutting measures are rarely passed on. Those savings are rerouted to the coffers of ownership under the guise of “rewards of capitalism”.)

Another mystifying fact is that the commission structure seems to be the same, regardless of the location of the property. This has been explained away with “everyone must be treated the same” and “the higher the value of the property, the greater the amount of marketing dollars needed to sell.”.  It does not matter if the subject property is a one bedroom condo located in the heart of the city or a three bedroom home in the suburbs or a two bedroom cottage in a rural area.  The commission remains the same if the home is 600 square feet or 6,000 square feet. There is no difference if it sits on .15 of an acre or 15 acres.  Most of the time, a seller has to pay 6% to sell a $100,000 home or a $500,000 home. The commission doesn’t change.

It would seem rather obvious that the amount being charged has no relationship to the item being sold other than it is a percent of the final sale.

One of the closely held secrets in the real estate industry is that often it takes more time and effort to sell a lower priced property than a higher priced property. (Note: this is a general rule that excludes distressed properties and vanity properties priced well over one million dollars).

From time to time, there are brokers that attempt to challenge this price structure. There efforts are impugned and ridiculed by the bigger players in the industry. It used to be, the only way to reduce the commission offered was to either offer an “a la carte” menu of services for a certain price or offer limited services for a certain price.  Now, it is quite feasible to offer full services at a price point below the industry “standard”.

All commissions are negotiable. The broker draws the line in the sand for how low they are willing to go. Agents, in this area, have to work under the supervisory umbrella of a broker. The broker has the final say. It does not matter what the agent believes, the agent can only do what the broker allows.

I am an agent. There are those that would suggest, if I don’t like being subjected to the final say of a broker, I should take the steps to become a broker myself. No argument from me on that. I just do not have the time or wherewithal to move forward in that direction.

I have just always wondered why real estate services cost too much.

I will end with yet another question….”Why does it cost the consumer the same amount of money if their home sells in one week or one month or one year?”

Note to any Federal authorities….I have no influence with any brokers and nothing shared is to suggest that anyone should collaborate on rates. I am willing to accept that it is just coincidence that all major brokers appear to charge pretty much the same rate.