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HGTV

An open letter to homebuyers

January 29, 2020 By Ryan Lundquist 44 Comments

Dear Buyers,

Can we chat? I’ve been having SO many conversations about buying in today’s market, so I wanted to stir some thoughts and maybe offer some perspective. I hope this will be helpful.

Things to keep in mind about buying a home right now:

Starter home vs dream home: We all want that pristine HGTV flip, but we can’t expect a dream home on a starter budget. In other words, a first home might not have the best upgrades or condition and it probably won’t be found in the best neighborhood either.

Be realistic: Sellers are prone to overprice and that’s their glaring real estate “sin” so to speak, but for buyers I’d say being unrealistic about what you can buy is a big issue. The dream is to pick up a $150,000 brand new modern home in Midtown, but that’s nowhere close to reality. At times it can be sobering to see what you can honestly afford, but if you’re serious about buying it’s best to get up to speed with that. You don’t want to be like Jim Carrey in Dumb & Dumber saying, “So you’re telling me there’s a chance?” No, there’s not a chance to buy that house with your budget.

It’s okay to be picky and patient: Buyers get flack today for being patient. My sense is buyers are picky about getting into contract at the right price and staying in contract. That’s okay and I think you’re wise for being discerning rather than making a flippant decision (like many of us made in 2005). So take your time rather than being hasty. Just be sure you’re realistic that the home you want actually exists in your price range.

Waiting for the market to crash: Quite a few people say they are waiting for the market to crash. The idea is to hold out until prices are low and then swoop in for something cheap. But if a market implodes you might not be able to buy. The temptation is to talk about a crash as if it’s isolated without any effect on income, jobs, consumer confidence, credit scores, etc… But a crash in prices could mean other parts of the economy and life are plummeting too.

The last implosion: There is real concern about buying at the top of the market and I understand why buyers are hesitant. Just remember the implosion that happened last time isn’t the new formula for every future market change. On one hand it’s normal to see prices go up and down, so we can expect to see prices decline at some point because that’s what markets do. But the severe collapse during the last decade isn’t the new template for the future either.

Timing a market perfectly is hard: It sounds easy to time a market perfectly and buy at exactly the right time, but it’s not so easy to pull off in real life. In my experience most people buy because of lifestyle and being able to afford the mortgage payment rather than being technical about where we’re at in a price cycle. I don’t say this to gloss over a growing lack of affordability or frothy prices in some markets, but only to share a real issue. Your lifestyle is likely to be the trump card here. Where do you want to live? What school district do you want for your kids? Or if the market did decline, where do you want to ride it down? (my friend Mike Gobbi asks this honest question). Realize there is no right time for everyone either. I say it’s best to weigh your goals and lifestyle with current market trends. Does buying make sense for your lifestyle and wallet? If the market did go down, would you still be comfortable with the monthly mortgage payment? Those are reasonable and honest questions.

Bring a strong offer: If you are playing the market, bring a strong offer rather than lowballing. I just saw a Realtor on Facebook talking about a client who wanted to offer at 50% of the list price. Yeah, don’t do that. We all know sellers are smoking pricing crack and they need to come down from their “high” expectations, but at the same time sellers are in tune enough to sniff out offers that have no chance.

Fear of missing out & pressure: I recently spoke with a young man who just graduated college and wants to get into real estate. He asked me for advice since he was worried about missing out on the market if he didn’t buy right now. I told him: “Do what you want and be sure you can afford the mortgage. If you can though, get aggressive first about paying down student debt so you have more freedom for future real estate opportunities.” I mention this because there is often pressure to buy RIGHT NOW when in fact timing might not be right for every individual. For this recent grad, I’ll respect whatever decision he makes, but he won’t lack opportunities in the future if he doesn’t buy now.

Pulling the trigger: At some point you have to decide if buying is right for you. I’ve watched friends obsess over prices for years and become paralyzed in making a decision because they’re so worried about the future. Look, either do it or don’t. That’s entirely up to you and there’s no pressure from me. But my hope is for you to come to a place where you have confidence and peace about your decision rather than being anxious for years without any progress.

Talk to a loan officer: Some people can afford the market but they don’t realize it because they haven’t explored options with a professional. This is why the first step is talking to a reputable loan officer. Find out about different financing options and special programs that might be available. Remember, we don’t live in a world where everyone has to bring 20% to the table either.

Prophets: Everyone has ideas about the future, but nobody really knows what will happen. I’m not saying to ignore trends or red flags, but only to be humble about predicting. Also, realize many who make predictions simply move their prophecies to the next year when they don’t come true.

Other: What am I missing? Please speak up in the comments.

That’s my two cents. I hope it was helpful.

Questions: Buyers, any stories to share? Is there any helpful advice here? What are you most concerned about? What am I missing? Anything to add?

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Filed Under: Market Trends Tagged With: advice for buyers, appraisers, buying at the top of a market, first-time buyers, HGTV, House Appraiser, housing trends, market crash, patient buyers, picky buyers, real estate bubble, sacramento home appraisal blog, start home

An open letter about celebrity flipping seminars

May 31, 2016 By Ryan Lundquist 34 Comments

Dear Public,

Last week I got an invite to a celebrity flipping seminar. That’s right, I can go learn how to flip houses from Tarek & Christina, the stars of HGTV’s Flip or Flop. Being that this is the second celebrity event to come to town this year, let’s talk about some of the dangers of these events and the real temperature of the flipping market. Please note: I’m not angry. I’m not a hater. I’m not jealous. I only want to give thoughtful commentary for the sake of others.

Celebrity flipping event HGTV Sacramento Appraisal Blog

Some things to know about these events

1) The reality stars won’t be there: This may come as a surprise, but the stars are not likely going to be there unless you consider a video appearance as being present.

2) The goal is to make money off you: The event is designed to whet your appetite only to invite you to go deeper by paying for courses. From the reading I’ve done it sounds like the next step costs $1,000 to $2,000, but some students end up spending far more over time ($5000+ easily). The event will feel good and you’ll probably be inspired, but make no mistake the real goal is to get you to open your wallet.

3) Flipping formulas don’t work everywhere: There is no such thing as a flipping model that will work in every location and every type of housing market in the United States, yet this event is being hosted in many cities and states. Moreover, it may be wise to be cautious about listening to a company coming from the outside, knowing far less about the local market, and using a celebrity’s star power to talk about flipping.

4) It’s no longer a foreclosure market: The market used to be full of bank-owned properties, so it used to be much easier to buy low-priced homes to make a quick buck. For example, in 2009 over 70% of all sales in Sacramento County were bank-owned, but now that number is 3%.

5) Experienced investors are struggling to find good deals: This event touts attendees will “gain insider access to private pre-auction real estate inventories.” Keep in mind even seasoned investors are struggling to find good deals right now because housing inventory is sparse and the foreclosure market dried up. Just last week I talked with an investor who was once easily in the top 10 in my market a few years ago, but is having a hard time finding deals lately. This doesn’t mean flipping is impossible, but it’s currently a really competitive market. That might be good to know before forking out thousands of dollars so you can “retire rich”, right?

6) More skill is required: Today’s market in flipping is much different than it used to be. A friend on Twitter said it perfectly: “The anybody flip market has dried up. It’s a contractors-special flip market now. Serious add-value needed.” I agree with this as today’s flippers often need to add square footage, add a second bath, maybe do a more substantial kitchen remodel, etc… It’s often not just a matter of picking up a property, putting on some “lipstick”, and re-listing it. The rules have simply changed since the “foreclosure flood” ended. In short, it takes more skill to flip in today’s market.

My advice? Be careful. We all want financial freedom, but you could easily spend thousands of dollars on these seminars to obtain “secret flipping knowledge” (that you can probably get for free). If you want to get into flipping I suggest meeting investors in your local market and scouring the forums on BiggerPockets.com for free flipping advice.

I hope this was helpful.

Sincerely,

Ryan

Questions: What is your favorite HGTV show? Did I leave anything out? What point resonates with you the most? If you’ve attended an event like this, was it valuable? If you are currently flipping properties, what advice would you give to a newbie? Any suggestions for places to meet local investors?

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Filed Under: Resources Tagged With: appraisals Sacramento, appraiser in Sacramento, bank-owned sales, celebrity flipping seminars, Flip or Flop, flipping market in Sacramento, Flipping Sacramento, HGTV, honest advice, investors, low inventory, real estate advice, REOs, Tarek & Christina

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