Blog with MAE Capital

By now you may have heard that things are changing in the Real Estate world with regards to commissions.   In a landmark decision, the National Association of Realtors (NAR) has lost a lawsuit that stated that Real Estate Buyers should be able to negotiate commissions with their agent and or Seller.  The lawsuit further states that Real Estate Buyers have the right to negotiate how their agent is paid and by whom.  We will discuss some of the pros and cons of this landmark case and how it will affect buying and selling real estate in the future.

Currently, Real Estate commissions have been paid by the seller of a property and is negotiated upfront prior to their property hitting the open market.  The traditional commission structure has been 5-6% of the sales price and if another Agent other than the agent who procured the listing called the buyer's agent generally splits that amount with the listing agent.  For example, if you are selling a home with a 5% commission in the listing agreement when another Agent brings a buyer to the home the commission to that buyer’s Agent has already been negotiated with the seller and that has traditionally been half of the total amount and in this case, it would be 2.5% to the Buyer’s Agent and 2.5% to the Listing Agent.  With the new ruling against the Real Estate industry, it now states that the buyer will have to pay for the commission when represented by an independent Agent.  It still can be asked that the seller pay this amount but now the Buyer has to be notified that it is their responsibility to pay their Agent.

One should know Real Estate law states that any Agent in a Real Estate transaction must take the seller’s best interests into account during the Real Estate transaction.  The exception is that if a Buyer contracts with an outside Agent to represent them their Agent can look after their best interests, not the seller's.   This is done with a contract between the Agent and the Buyers they choose to represent them, this is called a Buyer Broker Agreement and from this day forward this form will become mandatory for all Agents that represent home buyers.    Although this may seem like just another disclosure form in the already sea of forms a home buyer and seller must sign it and it has far-reaching consequences for the Buyer notwithstanding the cost of representation.  A potential home buyer may be forced to come out of pocket to pay for representation similar to an attorney-client relationship with a contract upfront stating how they will be paid to represent them.  If a potential home buyer chooses to use the listing Agent that buyer will not have the same representation as the Listing Agent has to look after the seller’s best interest before that of any potential home buyer.  This type of representation in California is called Duel Agency where the listing Agent represents both the buyer and the seller.  This is not legal in a lot of states so it will leave home buyers having to contract with another Agent.

The intent of the lawsuit other than the enrichment of attorneys was to allow potential home buyers to negotiate the commissions in the transaction.  This ruling missed the mark for home buyers as now they may have to come out of pocket with money for representation where before the seller has paid the buyer’s Agent.  In typical fashion, something that was spun to help home buyers will end up hurting them in the long run as it could dramatically raise the cost of buying a home.   A potential Home Buyer could now end up paying more for a home to get their Agent paid so they don’t have to come out of pocket to pay them.  If they go directly to the Agent who has the listing on the house and try to negotiate without an Agent representing them they too could pay more for the house without representation.  

All is not lost however, here at MAE Capital Real Estate and Loan, we have a solution to the problem of buyer representation.  We have been using this method to help our Home Buyers over the years and have been very successful and that is where we represent the home buyer and do the mortgage for them.   Yes, our Agents are licensed for both Real Estate and Mortgage which allows our Agent to negotiate with a home Seller for a commission which we also give a portion back to the Home Buyer for their mortgage.  In this scenario a home Buyer will not only get representation on their purchase, but they will get representation on the mortgage at the same time.  This method has proved to be far more convenient for a Home Buyer as they only have to make one call to their Agent to get information on the home as well as the progress of their mortgage as opposed to having to make 2 calls one to their Agent and One their Loan Officer.  Not only will this save them time it will also save them thousands in having to pay the new Buyer Broker it will save them on their costs of the mortgage and in some cases our Buyers get a lower interest rate as we have successfully negotiated all the fees to be paid by the Seller and we contribute some of the commission on the sale to the new loan.   In some other cases we have helped our clients Sell a home and Buy another home and we do their mortgage for them, in this case, we negotiate a far lower commission for our Seller and when they buy our contribution saves them  now on both brokerage fees as well as mortgage fees.  If you are considering Selling and buying another home this way will save you thousands and thousands of dollars when you work with MAE Capital Real Estate and Loan.  We call this service bundling which is similar to the way insurance companies work when you give them the opportunity to cover your house and cars.  Bundling Services in Real Estate now makes more sense than ever.  If you are looking for the best way save look no further than Mae Capital Real Estate and Loan.

Today’s topic might be a bit confusing to some, but rest assured if you know, you can make the right decisions with your money.  We are all seeing a tightening of money lately due to inflation which is where prices of goods and services go up faster than income does.  Inflation is the worst possible economic effect on any society as the people who are affected by inflation have less disposable income left over after they pay for housing, food, gas, and services.  In America, there is a significant amount of people that live paycheck to paycheck meaning that they spend every dollar they make on housing, food, fuel, and services every month.  When these prices go up and their income does not follow then people have to go to other sources to make those essential payments such as credit cards and this puts the average American in a deficit.  Although this is not good for the average American it is also not good for the banking system as the banks rely on the deposits of Americans so they can lend out that money to keep the banks in an income stream.  

This brings us to the banking system itself and most see the system as confusing and have no idea how banks actually work.  In America and other Western countries, the banking system is what is called a Fractionalized Banking system.  That is a big word that means that the banks can lend out most or all of the depositor’s money.  For example, if a bank has $100,000 in deposits from 5 customers ($20,000 each) and it pays 3% interest to those customers the bank then can lend out a good portion of that money at higher interest rates.  Remember that the banks have to keep cash on hand in case their customers need cash and in the past banks have held back about 10% of that money for cash.  The other 90% is lent out at a higher rate than they are paying the customers that have savings in their bank.  In our example, there is $100,000 from 5 people paying them a 3% return to keep their money in the bank.  The bank can lend out $90,000 and only keep $10,000 for cash reserves and when they lend out the money they collect say 6% on the money they lend out.  This process should leave the bank positive in income and has throughout the history of fractionalized banking.

Here is the problem with the system.  Banks currently have no reserve requirements meaning that in my example the banks can legally lend out every dollar of your savings.  This should not happen, and most banks will not lend out 100% of their customers’ deposits as they want to stay open in case there is a day when there is a heavy amount of withdrawal money.  Banks are in charge of regulating themselves based on their lending models and most banks do a good job of regulating this.  Here is the biggest problem facing the banking system today and that is inflation.  As we talked about earlier when prices go up faster than incomes the bank’s customers are spending more than they make and they do this with credit cards and equity loans.  There will come a point where the average American can no longer pay their debt due to inflation.  Human nature is to make sure they have food on the table first and foremost.  When the consumer can no longer pay their debt, they default.  This means that if Americans can’t pay their credit cards they go into default and the bank receives no money.  This holds for mortgages as well.   

This is where things start to get crazy so hang on.  Remember, that Banks will lend out around 90% of depositor’s money and if those loans start to go bad there is only 10% of cash left for banks to operate.  So, a bank’s reserves may get eaten up quickly if there is a high default rate.  Banks lend out money for Credit Cards, Residential Mortgages, and Commercial Real Estate loans and lend to other banks.  When customers start to default on their loans the income stream to the bank is greatly diminished and they still have to pay interest on the deposits they have for their customers.  If the bank has not held enough in reserves to account for this then the bank will fail.   Or as we saw in 2008 when this started to occur the government stepped in to save the larger banks not through the use of the Federal Deposit Insurance Corporation (FDIC) but actually printing money to put back into the system.  The smaller banks were bought up by the bigger banks.  In 2008 we had other factors going on to bail out the system as we were not in an inflationary time it was more of a recession meaning the economy was retracting with no inflation.  Real Estate values during this time went down the stock market sold back and there was high unemployment due to the recession.   Interest rates went down during this recession as there was no real inflation so with lower interest rates those who had the means bought homes and commercial real estate as the cost of money was cheap and this brought the economy back.  

Fast forward to 2020 when the COVID crisis hits.  This was a forced recession by the government telling people they could not work.  We had never seen anything like this in American history and the result was that the Government and the Banking system were faced with something they had never dealt with before.  The mistakes that were made have led us to where we are today.   The biggest mistake was to shut everything down that was not essential.  The next mistake was that the government did not take into consideration where we were in the business cycle with a healthy economy at the time before they shut the economy down.  The Government printed and sent out money to every American and it may have helped some in the short run the long run is what we are paying for today.   The Government also lowered interest rates to stimulate the economy and it sure did with people buying houses and freeing up equity to buy more stuff.    The money was flowing through the economy and people were buying things at a crazy rate until inflation hit people had to slow their buying habits and in addition to that the Federal Reserve saw the inflation and the only tool they had to slow inflation was to raise interest rates and they did.

Today all that stimulus money is gone, however, the government has continued to spend money by sending it overseas and starting foreign wars.  I can guess that the reason for the wars is to get the economy moving again as war requires a lot of money to flow.  We could go into the problems of this all day long, but this is not the forum for now.  The problem is, currently with the high interest rates and high inflation the more the government spends the less the dollar is worth on the world stage.   That coupled with the BRICS system that threatens to remove the Petrodollar on the world stage is further devaluing the dollar.  The banks are starting to see their default rate climb with inflation and this is diminishing the bank’s liquidity as this continues to happen, we see a tightening of the availability of money.  Today March 11, 2024, the Bank Term Funding Program (BTFP) which is a way for banks to secure funding from the Federal Reserve will be ending.  This will force the banks to go to the discount window to borrow short-term funds.   This will lead to money being tougher to borrow.  We are also beginning to see defaults start to rise and that coupled with the already tight money supply for Americans high interest rates and rising inflation it is a wonder why this is being done.  Is it being done so deliberately?  You can’t help but think there is some master plan to change the monetary system in America or to create a global currency minus Russia China, Brazil, India, South America, and countries in the Middle East (the BRICS nations).  But why?

I am beginning to think that all this stuff we have never seen before such as wide-open borders, money being sent to some foreign war nobody seems to want, money given to illegals, civil disruption, and propaganda being spread all over, is all part of a plan to make America weak.  The reason is to change the monetary system and move to more globalization that not many Americans want.  I see the UN helping in this destruction of America in that they are funding the illegal migration and to make it worse the US is the largest supporter of the UN.  I mention this not to scare you but to open your eyes to the great sellout of America and a move to the International Monetary Fund or something else, instead of the Central Banking system we currently use and enjoy independently of the rest of the world.  Before this can happen the Banking system in the US must collapse and it appears from someone who has watched and studied this for the last 45 years that this is what is happening.  I don’t want to scare people and I might be stating the obvious, but things are changing fast.  I am not holding out much hope for the Federal Reserve to lower interest rates any time soon as we still have inflation, and this is known not by the numbers the government feeds us but by simply going to the grocery store and filling up my car.  The mortgage business is the slowest I have ever seen, even worse than 2008.  This is also true for the Real Estate market and as things get tighter we should start to see more inventory hit the market as people are having a tough time paying their mortgages even if they have a 2 or 3% mortgage.  I am also seeing more people defaulting on their mortgages creating a higher foreclosure rate.  We as Americans can only do one thing to fix this crisis and that is to vote correctly, although I live in California and the system has been corrupt for decades it’s all we have to save our Constitutional Republic.  

What is going on with Real Estate and Interest rates?  This is a question that many are asking right now, including myself.  I started in the mortgage business while I was in college in the early 1980s, so I have seen a lot about the industry.  My father was in the mortgage business before me so you could say I grew up in the business.  I received my bachelor’s degree in economics and started full-time in the mortgage industry in 1986.  Things have changed over the years in the business, but the core of the business has remained the same.  When I started in the business there were no computers and everything that is now printed by a computer was hand typed and there were no fax machines or cell phones at that time either.  From a technological standpoint, there have been many changes but the way we qualify a potential home buyer for a home loan has not changed.   The Stock Market’s DOW Industrial average was around 2500 in the early 1980’s so things have changed there as we are over 38,000 today.  I have observed many changes, some for the good and some not so good but overall up to this point in my life I can say the business cycles have been pretty consistent.

What I am seeing now is something I have never seen, nor did I think I would see in my lifetime.  Like I said above the business cycles have been pretty consistent over the decades until now.   With all the economic data I see and more importantly, what I am observing is happening right now is scary.  I have always trusted the economic numbers that have been spoon-fed to us from the government until now.  Yes, I have lost confidence in the system I helped create throughout the years.  When the executive branch of our government stands in the public eye and lies directly to us I have to believe that everything that doesn’t fit their agenda is a lie and that is very sad for America.   When I hear the powers at be say that Bidenomics is working and America is thriving I have to call B.S.  We all know that things cost more than ever at the store, at the gas pump, and with housing so why is it that the powers at be say otherwise?  I try my hardest not to get into politics on this blog but is has gotten to the point that I have to bring it into the conversation as this is why the Real Estate markets are sluggish and interest rates remain high.  

My observations in the Real estate markets are that people want to buy but with prices so high and interest rates that are too high, they can’t buy.  Inflation has made the cost of everything go up and the value of the dollar goes down.  So, when prices of Real Estate should have gone down with higher interest rates and lower demand, we have seen Real Estate values stay the same and, in some markets, continue to go up.  The reason for this is that inflation has caused the dollar to go down so much that housing prices have stayed the same which means that they have gone down as inflation has eaten away the buying power of consumers.  To put in in other words as inflation makes the price of things increase it also devalues them in that fewer people can afford to buy them.   What higher interest rates should have done without inflation is to cause fewer people to be able to afford housing thus slowing the demand and making sellers of real estate have to lower prices in order to sell.  As we have observed with the higher interest rates over the last 2+ years Real Estate prices have not reduced as they should have or were intended to do.   They have stayed steady or have gone up and this is due to the inflation or the devaluing of the dollar which is the same thing.  

What is going on here, you ask?  It is pretty simple from my standpoint, but I am not sure our education system is actually teaching these concepts for the younger generation to fully understand.   To be clear, how the dollar devalues is simple economics.  The government is spending more money than ever, thus putting more dollars into the world economy.  When you have an oversupply of anything the value of that item will go down and that is what we are seeing with our US Dollar.  The national debt has risen over the last 3 years from $30 trillion to north of $34 trillion consumer debt (Revolving debt credit cards) has risen to historic highs of over $1 trillion in the US alone.  This means that every Citizen of the US bears the liability of government spending.  When we send Billions and Billions of US dollars overseas this becomes a double whammy in that there more dollars are in circulation but no benefit to the American Citizen.  Ironically a lot of the money the US is sending overseas is to protect the borders of other countries while our borders are wide open.  This poses many problems for our economy, the most obvious problem is that as more dollars are pumped into circulation the value will continue to decline, thus inflation.  You may have heard that” core inflation” has come down which we all know to be a lie, however, core inflation is the price of those goods that exclude energy (gas and fuel) and food prices which is what most middle-class Americans use the most.   When your cost of living goes up so high that you can only afford food and housing you have lost wealth and wealth potential.  

How do we get out of this cycle of lies and deception from those we used to trust to give us the truth and who are constantly lying to us?  I would say vote them out and start over, however, deception, lies, and corruption have taken over the media, social media, and the voting booth.  You see when the average citizen loses confidence in the voting system, we have lost our constitutional Republic.  When you hear that the United States is a democracy it is not, it is a Constitutional Republic, that is the kind of rhetoric we are hearing that is either a lie or something they want you to believe.  I am tired of people blindly believing everything they are told; we need some real changes quickly or our way of life we grew up with will be gone forever.  We as a nation are as close to a tipping point as ever before in our history and my fear is that with spending for foreign wars, out-of-control illegal immigration, and corrupt leadership we are very close to something we all should fear.   What we need to do is to come together to see what is happening right before our eyes and collectively do something about it.  If we don’t stand united, we will fall divided.  

To conclude, the Real Estate and Mortgage Markets are being drastically affected by the ridiculous monetary policies put forth by the current administration.  With out-of-control spending outside of our own country, cutting oil production in our country, and starting foreign wars we stand to be in this type of crazy economy for a long time without some significant changes.  My next big concern will be a crash of the stock market due to American companies not being able to profit like they have been able to in the past.  We must also watch the emergence of the BRICS monetary system that Russia and China are spearheading this could cause further inflation by the devaluing of the dollar on the world stage and if the BRICS system replaces the US Dollar as the world’s reserve currency, then we have more problems than I can write here.   This has not been covered in the media and is one of the biggest threats to the US Dollar in our lifetime.  This could also be one of the underlying reasons it seems we are marching into World War 3 to prop up the dollar.  To think how many people will die in a war so the US Dollar is protected when other moves could have been to avert this situation.   This is a very pivotal time in our history, and it seems that our media is more concerned about who’s feelings are getting hurt rather than the hard-hitting stuff we all know is going on and we should be concerned about.  So, if you are reading this I hope you understand the magnitude of what I have written and I pray it doesn’t get censored in our so-called free society.  

PS

I fear we may have gone too far with out-of-control corruption to the point where the economy as a whole is suffering from incompetent leadership.  If we don’t get immigration under control we will have too many people trying to get the same jobs and the same housing that American-born people need.   As it is those same immigrants are getting government checks or taxpayer money to compete with natural Americans for housing, food, goods, and services not to mention that these people have not been investigated properly at the border so there may be bad people that could hurt Americans or damage property or worse we don’t know.  This is causing a higher demand for housing and the longer it goes on the more it will hurt the American people.  Crime is also rising in the cities where these migrants have gone and is getting worse every day.  

2024 has started off with a bang with earthquakes and Tsunamis.  On the first business day of 2024, the bond market gave back some gains from the last couple weeks and the Stock market was flat but still positive.   If the first few days of 2024 are any indication of the year we will be in for some turbulent times.  2024 is also an election year so prepare yourself for a political ride that we have never seen before in history except for possibly in 1861-1865 (the Civil War).  

This year will start off with a slow economy, and a slow Real Estate market as interest rates are still too high for the average person to afford to buy a home, especially in California.  The Federal Reserve  (The Fed) has vowed to lower interest rates if they see the economy start to decline.  The Federal Reserve's Chief, Jeremy Powell, stated that there could be 3 times they consider lowering interest rates in 2024.  This would be a great thing for Real Estate as more people could afford to buy a home.  If the Federal Reserve does lower interest rates and you did buy a house in the last 2.5 years you would have an opportunity to refinance and lower your monthly mortgage payment.  If you have a $500,000 mortgage at 7.5% and the rates move down to 6.5% this could save you $336 a month in your mortgage payment and for most families every penny counts in this economy.  

Watch the election antics as this will also drive interest rates.  If it looks like people will be electing more of the same types of people to Congress and the Senate and the Presidency be prepared for more oddities like we have seen since the current administration has taken office.  We the people in the Real Estate and Mortgage industries know what has been done to the Real Estate Market over the last few years due to inflation caused by giving away taxpayer funds to other countries and stimulus checks and the general devaluing of the US Dollar.  You will not hear the truth on your TV or radio about what has really happened to the economy, so I am glad you found this article to see what has been done to the Real Estate Industry due to the mismanagement of the monetary system by our government.  This election will probably be the most pivotal election of your lifetime to determine the direction of the United States States.  I am not going to tell you who to vote for as I still believe people have the right to choose but some don’t as you see playing out in current news.  

One giant issue that is failing to make the news that is affecting the dollar is the advent of the BRICS money system which has vowed to take the US dollar out of being the world’s reserve currency.  BRICS is Brazil, Russia, India, China, South Africa, and now many other nations have joined this movement powered by China and the Yuan (Chinese money) to become the new world’s reserve currency.  This is slowly gaining traction as most countries are tired of Americans running the show and flexing their power all over the globe.  The BRICS system is poised to bring the US Petrodollar down which is how all oil has been forced to be purchased over the last almost century.   This means that until now all other countries had to convert their currency to the dollar to purchase oil which has made the dollar dominate and has allowed America to thrive over the years.  This is also a major reason why our military is in the Middle East currently and could spark World War 3, which is another topic that could have strong implications for the US economy.   If the BRICS money takes over as the world's reserve currency the US will be forced to convert the dollar to the Yuan to buy oil which could further devalue the dollar causing even more inflation for the U.S..

This is one reason why with the high interest rates we have seen we have not seen Real Estate values crash as inflation or the devaluing of the US dollar is keeping Real Estate values high.  We should also be aware of the debt the country has accumulated as America has over $33 Trillion in debt and until now it has not been a big issue as the US has controlled the world markets, if that changes then the dollar will be further devalued and we will have more inflation and with inflation comes higher interest rates.  Some would argue that America just needs to print more money and if that happened it would further devalue the dollar and cause even more inflation and more inflation means higher interest rates.  At this point in American economics, we are at a tipping point, and with the current path we seem to be on a collision course with monetary disaster unless we get spending and money giveaways under control, if not we could run into serious economic problems that I don’t want to get into in this piece.   

The economy is going to be the biggest issue of 2024 and that will directly affect the Real Estate markets if it is not managed properly.  Real Estate values will be in line with inflation this year and interest rates will have little effect on Real Estate values as inflation drives interest rates.  Interest rates are the Federal Reserve’s only way to combat inflation.  The theory is that as inflation increases the Fed will increase interest rates to slow consumer and business spending and thus slow the demand for goods and services.  What is not being addressed is the devaluing of the US dollar by other countries which makes all the goods we get from other countries more expensive, especially oil.   To conclude, I believe that 2024 will be a very volatile year for Real Estate and we can pray rates come down enough to get more first-time home buyers into homes.  

It wasn’t too long ago that we were looking at multiple offers on million-dollar homes and fights erupting on homes in the affordability range.  This was just in March of this year.  We are looking at something dramatically different now with interest rates driving the changes.  Those million-dollar homes are now sitting on the market longer and we are now seeing price reductions in that price range.  While in the affordability range we are seeing the demand get sucked up quickly and houses are coming on the market at a much faster rate.

I will start with the analysis on the upper end of the market, those million dollars plus homes.   I now can say without a doubt that the top of the Real Estate Market was March of this year.  Since then, interest rates have risen above 5% which alone has slowed the market.  In March of this year, you could still get a home loan with an interest rate in the 3’s, and now with rates in the 5’s that has cut the purchasing power of potential home buyers by a lot.  What we have seen is that people were qualified back in March for one loan amount and didn’t realize that rates have risen as much as they did and while they were not looking they no longer qualified for the homes that were in their price range.   Watching the Multiple Listing Service or MLS we are seeing more properties that were in pending status come back on the market with no fault of the seller but turns out buyers no longer qualify with the higher rates.

In the affordability range (here in California) is between $450,000-$650,000 we have seen more homes hit the market in the last several weeks.  As potential home sellers realize that the top of the market has come and gone they are now putting their homes on the market.  I believe that potential sellers have waited to market their homes until the top of the market and now that we are there, they are all putting their houses on the market at the same time.  This is great news for potential home buyers that have been beaten out of the Real Estate market and decided to sit on the fence until this very thing happens.   Demand will quickly be eaten up and inventory will continue to rise.    As interest rates continue to rise this will cut a significant amount of potential home buyers from the market.  So, if you fall into this price range of home buyer then I believe it won’t be long before we enter a buyer’s market.

As interest rates rise and inventory rises, prices will have to soften a bit to get buyers to buy.  In addition to that, those sellers will be making concessions to get potential buyers to buy their home.  A sales concession is when a seller pays for pest work to be done, the buyer’s closing costs, and other things to entice a potential home buyer to buy their home.  This is what is commonly referred to as a buyer’s market.  This will occur once the pent-up demand slows down and interest rates price home buyers from the market.  This is not something we like to see; however, I believe this will not cause a manic sell-off as we saw in 2008 through 2011.  The reason is simple we don’t have a money crunch like the last Real Estate correction.   Money is still available but at a much higher rate and we have relatively full employment, and we are not seeing mass lay-offs as we saw during the recession of 2008-2011.   This is not to say that it still can’t happen.  The way this would happen is if the Federal Reserve continued to raise Interest Rates past the equilibrium point which is where we could be today.

If you are a home buyer today my advice would be to buy as soon as you can as interest rates will continue to rise.  At MAE Capital Mortgage we have a “Lock and Shop” option for home buyers.  The “Lock and Shop” is once we have you approved for a loan amount, we can lock in today’s interest rates.  The lock period could be up to 180 days to give you the opportunity to look for the right home or if you are having a new home built it will allow time for the build.   Doing this will cost you a little more than if you were to have a home a lock your rate for 30-60 days, but in a rising interest rate market, it could save you hundreds on your monthly payment.  We are at a rare place in history where the Federal Reserve has already told us that they will have 2-3 more rate changes this year alone.  That said the “Lock and Shop” option offered by MAE Capital Mortgage Inc. is an easy choice to do if you are shopping for a home to buy in the next few months.

If you are a Potential seller in this market, know where your house falls in the affordability range.   The higher the value of your home the more difficult it is going to be to sell your home.   If you are considering selling your home in the next 6 months now should be the time to get your home on the market to get the very best price.  My advice would be to talk with a MAE Capital Real Estate Agent about getting your home on the market and devise a strategy with them to get the highest and best price for your home.  Here at MAE Capital, we are no strangers to changing Real Estate Markets and how to market to the changes our Agents are seasoned pros and our newer agents have the energy and mentors to get you the very best price for your home.  We also have a bundling program that when you list, sell and buy your next home with us and use our mortgage options we will buy your interest rate down so you have a lower than market interest rate thus a lower payment as our realtors will put some commission towards your closing costs on the new loan.  This program is great and is not offered by any other Real Estate firm.   

If you are considering buying or selling now would be the time to get on it.  I can say that next month the Interest rates will be higher, and so will gas prices, and food prices.  Inflation is here to stay for a while and the Federal Reserve has said they will be continuing to raise rates, we know that gas prices will continue to rise until we either produce more domestically or cut our demand, which is not possible.   We also need to keep a watchful eye over geopolitical events as they could cause even more problems to our economy.   We are living in a very unique time with a very unstable economy, high gas prices, high inflation, and a government that wants to spend more money and raise the minimum wage, and raise taxes, all of which will cause even more inflation.   

MAE Capital Real Estate and Loan’s operating model exemplifies a forward-thinking approach to the Mortgage and Real Estate Industry as a whole, which we apply to the benefit of our clients. Reach out for more info today! (916) 672-6130

Your Guide to Getting the Best Deal on Your Home

Whether it’s your starter home or forever home, you deserve to get the best deal possible. This guide from MAE Capital Real Estate and Loan looks at the pros and cons associated with buying either type of home, as well as important considerations to take into account.

Starter Home or Forever Home?

If you’re a first-time homebuyer, the decision to buy a starter or forever home can be difficult. As you weigh your options, there are many factors to consider. The most important is your future plans and how much space you’ll need in the next few years.

Should You Rent?

When deciding whether to buy a starter home or a forever home, you should also consider the possibility of renting. While this is not always an option, Money Management International notes that it may be a solution for those who don’t have the money saved up or have bad credit.

Considerations Before Buying Your First Home

Ramsey Solutions points out that if you are looking for your first home, then you need to ask yourself a few important things, such as, am I ready to buy a starter or forever house?

You should take into consideration your future plans, the location, and the price. Are you looking to settle down in one place, or do you want to keep moving around? What is your budget like?

The pros of buying a starter home include affordability, less upkeep, and the possibility to earn future income (i.e., renting it out). The cons of buying a starter home include smaller size, the possibility of needing repairs, and typically more difficult to sell.

What to Consider When Buying a Starter or Forever Home

Before deciding whether to purchase a more affordable starter home or your forever home, there are a few things you need to consider.

The first is the size of the home. Starter homes are smaller and do not typically have as many amenities as a forever home. For example, if you have a growing family, starter homes may not be the best choice for you. 

The second consideration is how much upkeep will be required from homeownership. Finances and time constraints should also be considered when purchasing a starter or forever home. Another factor is purchasing a home warranty, which will help offset any costs for minor or major repairs down the road. So if you're looking for the best home warranty company you’ll want to start your research right away. At MAE Capital Real Estate and Loan, we will pay for your home warranty if you use one of our buyer’s Agents to help you find the perfect home and the warranty for peace of mind.   You’ll also need to be prepared to put in the work needed to maintain your property? Once these decisions are made, it’s time to decide which type of property meets your needs!

The pros of buying a forever home include putting down roots, you won’t have to move again, and they’re a larger size so you can grow your family. The cons of buying a forever home include a higher cost and more upkeep.

As you can see, you have a lot to think about as you compare the pros and cons of starter homes and forever homes. Depending on your current financial situation, it might make more sense to go with a starter home initially and then work your way into a forever home.

MAE Capital Real Estate andLoan can help you make the best decision based on your needs.     Bundle Your Real Estate services with allowing MAE Capital Real Estate and Loan and save thousands of dollars and get a lower than market interest rate thus a lower mortgage monthly mortgage payment.   We look forward to helping you with all of Your Real Estate needs.  

Authored by Suzie Wilson

Image via Pexels

We are now 4 months into this COVID-19 crisis and people are getting very restless. People that reside in US Cities are feeling a bit confined with their current living conditions. If you live in a city you know what I am talking about. From having to wear a mask literally everywhere even outside gets old after a while. Not to mention if you are one who lives in a high-rise Condo or Apartment complex you must wait for an empty elevator or take the stairs with your groceries. When sheltering in place in your space you are breathing other people’s recycled air in those high-rise complexes and people are worried for their health and the health of their family. Not to mention most big cities, especially in California, have large homeless populations and the city streets are dirty and unsafe. As more big cities move towards the idea of defunding the police this is also getting people extremely nervous as most big cities don’t have enough resources currently to keep their citizens safe. In addition, in California, the Governor is releasing dangerous prisoners into our cities at an alarming rate under the guise of protecting the prison population. At MAE Capital Mortgage Inc. for these reasons, we are seeing what we are calling "The Great Migration Out of Cities". 

That said people are heading to rural Northern California in droves.  MAE Capital Mortgage Inc. has offices in Rocklin and Roseville and since we do both Real Estate Sales and Mortgage Lending, we are seeing this very interesting dynamic with people able to work from home and embracing the fact that they can now live anywhere.   There are more people with the desire to move out to the country where there is room to move about freely and can have outdoor space for there kids to play.  My wife (Margie Mower) who is one of Rocklin’s top Agents is remarkably busy with buyers wanting the rural properties.  She specializes in rural properties in Rocklin, Roseville, Loomis, Penryn, Newcastle, and the foothills.  When she lists a property in a rural setting the price of these homes are between $650,000 and $1,500,000 and she is getting multiple offers as soon as they hit the market from people seeking shelter away from cities.  She is hearing that the restrictions and the unrest in the cities are driving people away from the cities.  With Politics running rampant in cities where large concentrations of people reside the average citizen has become scared of the movements to defund police and the encouraging of violent protests so much so that they are seeking a slower and easier way of life away from the unrest in the cities.  The Governor of California is even moving out from Sacramento to El Dorado Hills which resides in the foothills of California about 40 miles from Sacramento.  He is buying a $5.4 million on a Governor's salary during a time where his assets are allegedly all in a Blind Trust not for his use.  Whatever your politics are I will bet you too would rather live in a safe environment without homeless, violent protest, filth in streets, and closed businesses.    Schools in rural areas have been allowed to open as the Health Crisis is less concentrated in rural areas which is appealing to city dwellers with families.  

If you are wondering where the people in the rural areas are moving to, it might surprise you to know that the majority are headed out of state.  Yes, with the turmoil, and over-taxation, and an environment where businesses’ small and large are being looked at as part of the problem and not the solution it is no wonder people are leaving.  California has another misleading ballot measure that, if passed, would repeal Proposition 13 (The Howard Jarvis Bill) and property taxes could rise to an amount that will push down real estate values.  The Ballot measure is disguised as an education measure, but if this passes it would give the State an open opportunity to raise all property taxes on both residential homes and commercial property.  This could be disastrous and push Cities like San Francisco and Los Angeles into further decline and more people leaving to seek cheaper housing.  California is in a bad state currently with more people leaving than coming into California and it is all due to the current state of politics in the state that is running it's cities and businesses into bankruptcy and decline.   It is obvious to us the trend and the attitude of buyers and sellers as to what their motivations are with what is going on in the world. 

The world is an ever-changing place and with the health crisis that continues to give juice to the mainstream media and their fear machine, it is no wonder people want out of confined unsafe spaces like big cities.  RV sales are also hitting all-time highs as people look to escape the mismanaged cities in California.  Education and the thought of continuing to home school your kids is also playing a part in moving to rural areas in California where they are more apt to open schools first with smaller population sizes.   As rural Home specialists, we are here to help if you are looking to remove yourself from a City and move to the quiet rural areas of California.  We are also here for those that have been living rural and have found it time to leave the Golden State, we can help sell you home quickly.  If you are seeking to buy or sell a property with a well and septic system (common on rural homes) we know who to call to inspect these properties and how to educate you with the new country lifestyle.   We have many people that are making long-distance moves so if you or someone that you know needs our expertise give us a call.  www.maecapitalcom 916-672-6130. 

I have heard that some people are worried about the future value of their homes amidst this pandemic.  I am hear to tell you that in my 35+ year stint in the mortgage and Real Estate industry and with my degree in economics I have never seen anything like this.  I saw the stock market crash in 1987, the financial meltdown of 2006-2010 and various different corrections to the markets over the years.  This was sudden and could not have been foreseen, unlike these other crisis’ this one came when an otherwise healthy world economy was doing well.  Shutting down the economies across the world is something we have never seen before and really hope to never see again in my lifetime.  It is going to take a bit to get the economies up and running again not for lack of desire to get up and running again but the fear of catching what has been advertised as a deadly virus, whether you believe it or not.  

We all know the toils and the riffs of this virus and I am not hear to tell you what to believe but to show you facts from an economic point of view of the housing market.  The housing markets are all dependent upon demand, demand to buy and sell.   If we look at Real Estate from a demand side you can see in some areas have pent up demand, meaning that buyers have been sitting on the proverbial sideline waiting to buy until the virus threat has subsided.  This holds true for potential sellers as well.  The homes that are being listed during this time come with several guidelines in order to show them, so buyers and sellers may be set back with the showing guidelines.  The changes to show homes are that a Realtor and the people looking at a house must wear mask and gloves, the Realtors has to call the listing Agent to obtain a special code to show a house so it can be tracked from the central Metrolist computer system.    These are new rules and are not too bad to show a house and home sellers should be comfortable that there won’t be any residue, if you will, from people looking at their homes.

I think the biggest challenge the Real Estate industry will be to get potential home buyers qualified for a home loan coming out of this crisis.  Interest rates are great and that will not be the problem it will be the job losses that may hold down demand for buyers to buy.  Also those folks that let their credit go during the crisis will inhibit some potential home buyers from buying a home.  An economy is dependent upon people working and when a mass number of people found themselves suddenly laid off from great paying jobs those people will not feel comfortable going out and buying a home very soon after they go back to work.  On the other hand those that have been working from home and may live in a city may want to move out from the big cities to get away from overcrowding and may be looking to move to the outlaying subdivisions figuring working from home away from the big city may be a better alternative.  That would create listings in the cities and demand for housing in the suburbs. 

Home prices or values are based on demand and that will vary from town to town and city to city.  Housing prices have not been affected yet by this pandemic, other than Real Estate sales as everything else during this crisis basically stopped or paused as a better hopeful word to use.  To view the Real Estate Industry as paused is far easier to digest than to say it has stopped, as it has not stopped.  We are, in fact, we are starting to see the pent-up demand from both sellers and buyers.  As the shelter in place orders drag on, especially in California, people are beginning to push back from the order and go out and look at homes and list homes for sale.  We have seen an increase in this activity in the last couple of weeks and our clients are telling us that they are more than ready to get moving rather it be buying or selling.  No one knows what will happen with jobs but it is a fact that the longer this goes on the more job loss there will be as employers just can’t keep all the staff they had if the demand for their product has not come back. 

So time will tell what will happen for sure, but I have some ideas and areas in the economy that I have been watching to get a handle and a pulse on the market.  I see pent-up demand to hit first with an initial push to buy homes and sell homes.  Once this initial demand wears off it will depend on the job market to dictate who can buy and who can’t.  The more people that have jobs and feel comfortable with buying a large purchase such as a home will help the overall economy.  Home buying and selling also creates jobs in home improvement areas such as contractors and home improvement stores.  We have already seen a increase in demand at home improvement stores, but not sure yet if that is to improve their home to live longer in or to improve it to sell it.  I also see that those folks that have been locked up in their homes in the cities getting tiered of the small confined space and may want to move to the suburbs where there is more space for a family to move around.   I see Real Estate sales as gaining momentum as we are slowly released from the stay at home orders or as people become more frustrated with them.  NO matter how you feel about all this virus stuff Real Estate will be bought and sold during all this and after all this. 

I don’t see values declining the way they did during the financial crisis of ’08-10 as the reason for that decline was the weakness in financial markets and lack of liquidity.  Meaning that the reason for the decline in values during that crisis was due to the evaporation of products that allowed people to buy a home with little or no money at all and when it was determined that the holders of those mortgage notes were not solvent a massive sell of occurred.  Once the financial markets started to fail during that crisis and people ended up with negative equity in their homes they just let them go to foreclosure.  Since then we have put some stops in the lending world that requires people to actually fully qualify to buy a home before the can buy a house, unlike the prior crisis.  So in this health crisis we are not seeing anything like the financial crisis as people that own home now had to qualify for it and are more financial stable than before.  However, we do have to look at all of those people that have lost their jobs during this crisis.  This will be the single biggest factor in this health crisis verses the financial crisis.  So the longer this goes on the longer it will take to see what will happen to values, but in my opinion, I think initially we will see an increase in demand then a slight drop off in demand until we get back to a more full employment situation like we were before this crisis.  I see a steady or flat Real Estate market moving forward as people always need housing.   I do not see a large decline in values, especially in California, as I see the types of jobs to where people make enough money to qualify to buy a house still here as those folks are working from home where in the last crisis we had jobs evaporate not shift like we see here.  The future remains to be seen but I like to be an optimist on this as I believe people are resilient and will come out of this stronger and smarter.  As usual if you need help with qualifying for a home loan or buying or selling Real Estate call us we are here for all of your Real Estate needs (916) 672-6130. 

Ok enough is enough we need to open this economy back up.  Despite what people say about the virus it has already played out in California in December January and February.  You see every year in California the sun starts to shine more intensely in April and as we move towards summer.  It has been widely publicized that the Coronavirus will not survive for long in hot environments.  I personally traveled to Australia over the Holidays through the end of December and into January.  Upon arrival in Australia I started to feel ill but I was on vacation, so I was not going to let a little cold get the better of my vacation.  This mystery cold/virus had me not feeling well with a cough and infected eyes for 2 weeks and by the time we had traveled to the hottest portion of our trip ( Cairns Au.) the illness had subsided.  As you know it is Summer in Australia that time of the year so it was warm the whole time.  Then a month after I got home in February I got sick again almost the same thing but this hit hard and the cough was more severe and I had a fever and I coughed for a month until it went away the end of February.  Then we heard about the virus from China and we were told to shelter in place in March and by that time it had already gone through California.  The media neglects to show you a map of the world and how a contagion replicated itself and how it travels the world.  If you look at a map you can see that the West coast of the United States, California, Oregon, and Washington would get this virus way before New York would, so it stands to say that California already has developed a herd immunity or it is just too warm for the virus to exist long enough to infect more people.  This is not to say it won’t come back and then will we know what to do or do this all over again?

That said, we have to start to believe in in each other again and know that we will get sick and people will die from this virus and many other things that we get ourselves into as a free society.  So how do we get the economy going again with people working from home and or laid off and non-necessary business’ that have been closed for so long how do we get it moving?  This is going to be tough as the people that have been making money during this have to go out and spend it locally and if they are scared to go out and spend many small business’ will be forced to declare bankruptcy if they have not already.  The Travel business: when will people start to trust air travel again, hotels, rental cars, air bnb?  There are so many little avenues within the economy that depend on each other, so when you spend your money on travel you are supporting so many others than just the airlines.  Restaurants: how are they going to look?  Is the government going to make it a law that you must sit so far apart in a restaurant, or have a barrier installed and will consumers want to visit busy restaurants again?  If laws are imposed on restaurants to not accommodate as many people, at a time, they will be forced to raise their prices to offset the increased space requirements or shut their doors.  Restrictive laws will further inhibit growth and may force many of our favorite restaurants to go out of business.  Banking: as you know you can’t go into your bank’s lobby as they are closed.  Will they open up the lobby’s again or will they have realized that the consumer has changed they way they can do banking, will we see more virtual banks and less people working in a bank?  All of these little things and so many more will play in as the economy opens again.

Do you feel comfortable with your job or your financial situation?  That will be the most important question moving forward to open the economy.  If you don’t feel comfortable spending, you won’t, and if there are many more people just like you the economy will not open as everyone hopes it will.  The United States and capitalism are both all based on consumer spending, without it we have a stagnant economy.  On the other hand, is there a pent up demand?  Consumers that have been scared of going out now have the green light to move about so they go out in hordes and buy up things at a fevered pace.  If that is the case the economy will quickly get back to some sort of normalcy.

Either way the Real Estate and the Mortgage Industry will need time to get back to normal as well.  If consumers are tired of the house they have been locked in for the last month and a half they will seek out a new house for their family.  If one family that decides to sell their house and buy a new one that will help Realtors, Mortgage Companies, Title Companies, Appraisers, Home inspectors, termite companies, sign companies, credit reporting companies and home improvement stores.  So, if people don’t sell and buy after this is over you can see all these industries effected.  However, there is another little problem that will arise out of all this and that is employment.  The people that have lost their jobs during this crisis will not be able to buy a new home, in most cases, until they have gone back to work or can pay cash for a house.  Households may have had one of the two workers laid off and may not have the ability to save for a down payment or may not feel comfortable so they will hold off until they feel comfortable again.  Another concern people’s credit may have been hurt by this not allowing them to qualify for a home loan.  People that have not made their mortgage payments will not be able to refinance to the low interest that will be there to stimulate the economy when this is over.  People that did not make their rent or car payments may not be able to buy a home for 12 months after the crisis. 

Not to be a downer but it will take some time to get back to Real Estate as normal.  I heard from CAR (California Association of Realtors) that Realtors may not be able to show homes and that virtual tours are going to be the “new normal” of selling homes.  This means people will not be able to see the home they are buying in the inside until they can do a walk through at the end of the transaction.  This may see the demise of Real Estate transactions at the end from homebuyers seeing the house for the first time and may not like it.  This will be interesting to watch unfold as people get more “used to” the new normal. 

Let us conclude this with some positive news with the Mortgage industry.  Interest Rates are the good news here with them staying down.  Although there is still a lot of confusion in the Mortgage industry things are getting done.  Now that we have figured out how to work with large companies that have their workers working from home we can navigate through the process as well or better than most in the industry.  Here at MAE Capital we are booking new refinances every day.  People can apply from their home on their computer or they can download our App and do it from their phone.  As far as delivering documents to us you can scan the documents directly from your phone using an App like Cam Scanner.  Our experienced Loan Originators can work virtually from anywhere so you will be taken care when you apply for your refinance with us.  We look forward to working with you. 

OK the world has gone crazy, have you?  Do you have 2 thousand rolls of toilette paper, 15 bottles of hand sanitizer?  I get the idea of being prepared, but to hoard essential items is ridiculous, but with the media fanning the flames of hysteria I understand the effects.  What the average person doesn’t understand is how all of this works from an economic point of view.  We have a situation that we have never seen in history, and history is how we evaluate the present in economics.  Economics and theories that support the way markets interact are changing as I write this.  Obviously demand and supply is still in full swing, but in very different ways.   What we are seeing here is a rapid shift in demand from a wide variety of items that people want or need on a daily basis such as cars and appliances and other items that are nice to have but in the overall scheme of things  are not as necessary as food and basic need items like toilette paper and this is why we are seeing a rush on these items. 

So, it stands to reason that if the demand for those nice items such as Real Estate has diminished, temporarily, you will see some real change.  In the short term you will see Real Estate values will correct downward as people are not going to buy during these times.  People are also worried about their jobs going away or that their income will be cut from layoffs or even getting sick.  Interest rates are not helping with this at all, despite the Federal Reserve lowering their Funds rate to zero.  What people don’t know that Long-term mortgage rates are not controlled by the Feds.  In actuality, the mortgage markets have gotten worse and rates have risen significantly over the last few weeks.  Where the long-term mortgage rates, in the beginning of March, was down to 3% and now after all the panic in the markets long-term rates are up to around 4.5% or more.  Why is this happening? The answer is complex, but simply put, when everyone is trying to sell their investments and there are not enough buyers price has to go down to get people to buy.  When talking about interest rates you get an opposite effect as Interest Rates have to go up to attract investors to buy them (the Mortgage Notes), put simply. 

So, you have people with no jobs, or are laid off, and have a higher interest rate environment, the demand for housing dramatically down.  What you have here is a perfect storm.  The demand for housing or home ownership is going to stop until the world gets figured out.  The good news is that those that do own a home will most likely be able to keep it as the Government has enacted measures that will not allow mortgage companies to foreclose during this crisis.   Mortgage companies can offer forbearance as an option during these tough times, which is putting your mortgage payment off until you get your job back.  Forbearance, has to be granted it is not a given even in these times, you have to ask your mortgage company for forbearance and they will grant it to you if you can prove you have been financially hit.  So don’t just stop making your mortgage payment call first, but also know that you will have to pay the amount back that you are not paying now, it will be added to the end of your mortgage and you will pay interest on it. 

Renters that lose their jobs or can’t pay for some reason can’t be evicted for up to 4 month but know that you will have to pay that amount back within 2 years to your landlord, so if you can make your rent do as you will get way behind and may get evicted in the end.  It is always recommended that you make your housing payments if you can, because getting behind on payment that large may get you to a point in time where you just can’t make it up.  On the other hand, if you are renting and have been saving to buy a home and you don’t use that money to live on during these times you could come out of this being able to buy at low prices. 

If you have been considering selling your home, it might be prudent to wait until people get back to work in a few weeks to put it on the market.  Realtors in this market are seeing people that had their homes for sale prior to this put their listing on Hold.  What this means is that the sellers of property that put their listing on hold can’t show them or make offers on them but by doing so their listings are still being seen by potential buyers that after the crisis is over may be looking to buy.  As in the Stock Markets you want to buy low and sell high and I think that in the short term there will be deals for investors to get in on, but it will be short lived.  As this crisis ends and people go back to work their attitude will change towards buying again as they feel more financially secure.  If your house is on the market right now be patient and talk with your Agent as to how to strategize the sell of your home when this is all over.  I see that there will be a short-term drop in prices but will recover as the Stock Markets recover. 

This is unheard of and we have never seen this before on any scale let alone as large as it has gotten, global. With no history to look back on we just don’t know what is going to happen.  In history we had a pandemic in 1918 that ended up killing over 100 million people, we don’t see this happening with this one, but there was a war going on at time and no shelter in place orders.  During that time the war machine was roaring so the economy was not hit nearly as hard as this one with everything shutting down.  So, we don’t have anything else to compare to in history as to what is going to happen.  I can’t help but to think when this goes away what economic carnage will it have left for the entire world to mop up?  What I do see is that Interest Rates will come back down as the Government pumps money (liquidity) into the banking system and they start purchasing Mortgage Backed Securities again.  With Rates going down people will refinance their existing debt to lower rates and take equity out of their home to recover from this time.  For now, we all have to wait and be patient, put things on hold, and enjoy what we have and help others that may not be as fortunate. 

It’s March 2020, not yet spring but in California it is always spring like weather.  Do you know what your house is worth this year?  Have you thought about selling and buying another home?  This might be the perfect year to do just that.  Why, you ask?  Well when the earth the stars and the moon all align you should take notice.  The interest rates are at historic lows would be the first good reason.  The second good reason would be that our economy is at full employment (Full employment is when the unemployment rate is less than 4%).  The third and most important for sellers is that the housing prices are still high, and we have not seen any correction in prices.

Interest rates are important for a variety of reasons.  When you are selling a house, you want the rates to be as low as possible so more potential buyers can qualify your house.  Low interest rates also provides a sense of security for home buyers when they are shopping.   Low rates also create a sense of urgency with potential buyers as they don’t want to miss the opportunity to get a low interest rate.  At MAE Capital Real Estate and Loan having control over both the Real Estate and the loan process can further save potential buyers and sellers as we will give buyers money towards their loan to lower their interest rate even further when we represent a buyer and do the loan.  With Rates so low putting your home on the market sooner than later will get you property sold faster as the inventory is so low currently.

In addition to low interest rates Americans are fully employed according to the labor department. So, with the majority of Americans employed in this booming economy there should be more potential home buyers in the market today.  These young buyers have more information at their fingertips than ever so they know that rates are low and that they can afford to buy.  In a market where most people are employed wages tend to be a bit higher so employers can keep those employees they have and not lose them to their competition, thus keeping job security and higher wages to potential home buyers.   This sense of job security is also making existing homeowners feel more comfortable with their finances and are exploring the possibility of selling and moving up.

We have not seen the influx of sellers yet as most potential sellers like to wait until spring to put their house on the market traditionally.  Those that make the move early will reap the rewards from a quick sale at the top of the market if their house is price properly.  All of this creates stability in the Real Estate prices as the current supply is less than the demand which usually means that prices should increase,  We have not seen the increases yet as we are still seasonally stagnant with buyers waiting for the spring inventory to hit the market.  With that said if you are thinking of selling your home this year it would be prudent to get your home on the market as soon as possible with rates low and full employment.  Here at MAE Capital Real Estate and Loan we are here to help.  We have programs for first time home buyers, we have the lowest rates in the market on home loans, we  bundle our services to save our clients money and if we list and sell your home represent you when purchasing your next home we will kick in money to lower your payment even further.  Give us a call (916-672-6130) or check out our site and download our App. 

For most people, purchasing a home is the single largest investment they will ever make. And while many are well-versed in paying a down payment, mortgage and insurance, a lot of homeowners are caught by surprise when faced with another expensive part of owning a home: major repairs. Owning a home comes with the inevitability of things wearing down over time or breaking suddenly, and rather than simply calling the landlord, the homeowner is responsible for paying the costs. If you own a home or are thinking about buying one, these tips can help you to prepare for the major home repairs that will come your way:

Saving Up

No matter who you are, paying for home repairs ideally will not land you up to your ears in debt. You may be tempted to pull out the credit card or delay paying other hefty bills (e.g., mortgage, student loans, etc.), but this can get you into a lot of financial trouble. The best way to handle major home repairs is to be prepared when they happen. Start an emergency fund that is dedicated solely to covering the costs of such repairs. This can either be done through a savings account with your bank or by keeping an old-school cash envelope at home.

Many experts suggest setting aside at least 1 percent of your home’s value each year for repairs and maintenance. For instance, if your home is worth $660,000, you would put $6,600 in your emergency fund every year. Such savings can quickly add up, leaving you in a better position to cover the cost of that roof replacement or plumbing disaster.

Refinancing Your Home

Another option for paying for a major repair is refinancing your home, which allows you to take advantage of your home’s equity. With cash out refinancing you can get a new loan for your home that has a higher balance. Then, you receive the difference between the two loans in cash. Thus, you can then use the cash to cover the cost of the repair. It’s also worth noting that the new loan could end up coming with more favorable terms than the previous one, making it a win-win situation. Here at MAE Capital we can walk you through this process. 

Taking Out a Personal Loan

If you don’t have an emergency fund built up or refinancing isn’t an option, you could explore various types of personal loans out there. These days, it’s easy to apply online for a personal loan. Moreover, some loans even start at under 4 percent interest, and that’s much lower than using a credit card.

Selecting a Contractor

The contractor you use for each home repair can make a big difference in the time and money you spend. For example, if you choose a contractor simply because they offer their services for the lowest price, you could end up with shoddy work; this means you would then have to go through a lengthy legal process to get your money back or pay a different contractor to come and fix the bad repair.

To avoid a situation like this, be sure to ask around for referrals and interview several candidates. Check the licensing and insurance of each candidate, look into their job history, and get estimates for the work needed. Then, you will be ready to compare bids and qualifications to determine which contractor is best for the project. Furthermore, you will want to be sure to get a detailed contract in writing before any work has begun.

Homeownership comes with the costs of major home repairs, and it will save you a lot of stress and financial trouble if you have a plan when the day comes. Start contributing to an emergency fund today. Look into cash-out refinancing and personal loans to see if those options will work best for your situation. Finally, be diligent when choosing a contractor for each project.

 Article by: Natalie Jones

Photo Credit: Pexels

The Real Estate business has been done the same way for decades and the only thing that has changed is how we deliver information to our clients.  The internet has made the business easier without a doubt, in the way we can see homes for sale and do research on neighborhoods and schools and crimes in specific areas.  The invention of digital documents has helped with signatures and the delivery of necessary disclosures to our clients.  However, the core business model has not changed for most Real Estate firms.  That model is to market to your clients and potential clients for their business, ascertain what they wish to do buy or sell, then have your clients contact a lender for pre-approval for a mortgage.  Then once the Agent knows how much their client can afford, they then start searching the MLS for homes in their client’s desired area and price range.  Or for listings they determine how much they can afford for their next home, as to not sell a home with no possibility of their client buying another one, in most cases.  If they are working with a home buyer or when the seller becomes a home buyer upon the sale of their existing home, they then find properties in the area they wish to be in knowing what they qualify for from the client’s lender.  Once a property has been identified as a property their client wishes to make an offer on the Agent then contacts the lender for a letter of qualification to be submitted with their offer to purchase.  When the offer is accepted the documentation has to be disseminated to the lender and the Escrow/Title Company and the lender.  Then the Agent arranges inspections and the lender sends out disclosures and orders the appraisal the Escrow/Title company orders the preliminary title report.  When the documentation comes in it has to be shared with all involved.  The Agent will periodically check with the lender for progress reports, but has no say at all in the loan, and the Loan Officer will give updates to all but has no say in the Real Estate transaction at all and may not know if things have changed with the disposition of the property and or contract and inspections.  When the lender has completed their process, they send the legal Loan Documents to the Escrow/Title Company for the buyer and seller to sign.  After everyone has signed and all the monies have been accounted for the loan funds the transaction closes and all the service providers get paid.  This is the way Real Estate Transaction have been done since the beginning of modern times.

When you read this transaction flow you see there a several people and companies involved in making a Real Estate transaction close.  When you have that many people, they all need to be paid and that is why it is so expensive to buy or sell a house.  When you sell a house, you will pay an Agent or Agents, I most cases, 5 or 6% of the sales price and that is well worth not having the liability as a seller alone in the transaction.  A highly qualified Agent will make that money back in many ways such as piece of mind that all the laws of selling your home are being met and all the required disclosures and inspections have been completed and done correctly.  In many cases a good agent will price your home and market your home so that you get the highest and best price for your home thus making you more money than you probably could have trying to sell it on your own or using a cut rate internet real estate firm where you have to do most of the work.  When you are the home buyer in a Real Estate transaction your Agent is paid by the seller out of the 5-6% commission that has been pre-set when the listing was originally taken.  The commission to a buyer’s Agent is usually split between the listing Agent and the Selling Agent (the Agent representing the buyer).   Why this is important I will get to in a bit.

When you work with a lender, in a traditional Real Estate Transaction, they are independent of the Real Estate Company and they get paid from the fees charged and rebates from the Interest rate on the loan.  This may be confusing but usually a lender will make between 2 and 3% of the loan amount to keep it simple.  Again, I will tie this in as to the importance of who gets paid what later.  Remember in the transaction that the lender orders all their own disclosures orders the appraisal and has to communicate to all the Agents and title company.  The lender also needs most of the documents that the Agent has signed such as the contract and any inspections the Agents have had done all the while keeping the Escrow/Title company informed of the progress. 

As you can see the typical Real Estate Transaction still has many inefficiencies and redundancies in the typical transaction.  I offer, as a solution to efficiency, to merge some of these functions together to make the transaction smoother and more cost efficient.  I would merge the Real Estate and the Loan Functions together in order to be more transparent with the information in the transaction.  This would cut time frames down and the client would only have to make one phone call to get the status of the loan and the Real Estate.  This would cut out any miscommunications with the inspections as all eyes could offer advice as the inspections come in.  Not to mention, prior to the contract being written the Agent and the Loan Officer are under the same roof so an efficient plan can be put together to benefit the buyer in an approach to making an offer that will get the buyer the best deal possible coupled with the best financing.  If the Agent also is representing the seller and the buyer and the loan things can really be done efficiently. 

Picture this, as a home buyer, you make one call to a company and you get your home loan pre-approved and you are looking at houses that same day.  Then when you make an offer on a home your Agent and Loan officer already have made a strategic plan for you in the office they both work in, or they are one and the same person.  When you make the offer there is no worry about the financing as your Agent has seen everything the Loan Officer has and vise versa.   In addition, your loan officer is not tied to one lender he or she can find the best financing sources across the country saving you even more money.  The Loan officer can offer tips with financing to negotiate a better price on the home.   Some of the commission from the sale, that we talked about earlier, can be used to buy down the loan interest rate and fees.  Remember the 5-6% commission the seller splits with the buyer’s Agent and the Seller’s Agent, well some of that commission can be used to get you a lower interest rate thus a lower payment. The additional monies can be used to lower your loan costs as well.  If you have the same office collecting 5-6% on both the loan and the Real Estate Commission the company can afford to give back money so that you as a buyer get a lower interest rate and a lower monthly payment than you would have got buy using an Agent from separate firm as the Loan Officer.  The trading of information will also speed up the transaction and make it far more efficient.  As a Home buyer you would only have to meet at one office or talk to the same office to get all your information and within the office the loan and the Real Estate transaction are being completed at the same time under the exact terms of the contract with both the Agent and the loan officer working together and in some cases if the Agent is a Broker he or she can do both the Real Estate and the Loan.

An Example will look like this:  A First time home buyer contacts the Real Estate and Loan Firm and wants to buy a house.  The Agent prequalifies the buyer over the phone or computer and gives them a list of items they need to become fully approved for the home loan. The Agent can run credit and run the information through automated underwriting and receive the approval with the client still on the phone.  The Agent then can determine from the client where they wish to live and provide current listings in that area for the client to view.  The client can ask to see specific houses and the Agent can then arrange to show them with the sellers.  Knowing the client needs and financing options the Agent can make an offer that is the best for the client and provide the approval to the seller with the offer thus making the client's offer more attractive than other offers they may have received.  The client throughout the process only needs to make one call as does the Agent. The agent can get the Loan information and the Real Estate information at the same time. On the other side of the transaction the listing Agent only needs to make one call to get everything they need to keep the seller informed. The Buyer's Agent finds the best lender in the country for their client getting them the lowest interest rate possible as well as contributing to their closing costs lowering their rate and monthly payment.  The buyer gets into their house with very little running around and stress of the transaction. Everyone wins.    

This may sound like utopia, but it is reality here at MAE Capital Real Estate and Loan.  We have perfected this system and we are saving our client thousands of dollars when we represent them as their Realtor and their Lender.  We can save home sellers thousands as well when we represent them as the seller of their home and find their next home for them and do the financing.  The efficiency in bundling these services in incredible and saves our clients thousands of dollars and countless hours tracking down their Agents and Loan Officer.  If you would like to see this in action, please give us a call at 916-672-6130 or click here to email us. We are looking forward to showing you this incredible modern system. 

The Real Estate Market is still Hot in California but not as hot as it was so why?  Rising interest rates has a lot to do with the lag or slight slow-down in the market as well as a few other factors.  When evaluating Economics and economic trends you have to look at more than just the numbers and statistics, you should be looking around and talking with people in the industry to hear first hand what is happening.  To fully understand what is going with Real Estate Economics there are many factors to take into consideration such as people and their tastes or appetite to purchase Real Estate which can't be found in published statistics.  In California we have about as many different Real Estate Markets as we have climate zones.    So to throw a blanket over the entire State’s Real Estate Markets would be doing everyone reading this a disservice.    So for the interest of time I will cover the macro economics of Real Estate in California (or for those that follow Bernie Sanders Macro is a broad overview of the Real Estate Markets in the state). I know economics is not a class taught in High schools in California so I will try to break the theories down to a level that everyone should understand.

First let’s start with the obvious change since the beginning of the year in the world of Real Estate and that is the fact that interest rates have gone up.  Interest have gone up from an average of 3.5% a year ago to 4.5% this year.  This may not seem like a lot but when you equate it to qualifying for a home loan it can be significant.  An example would be a couple that makes $100,000 annual income with about $800 a month in car payments and revolving debt.  These folks would have been able to qualify for a $464,000 home loan last year at 3.5% and this year making the same income they will only qualify for a $411,000 home loan.  The difference in buying power is $53,000.  So as you can see their buying power was diminished by higher interest rates.

The next factor we have seen is that prices of home have gone up by 10-20% over the last year depending on the area in California you look at.  What this means is that if you were looking at houses last year in the $400,000 range those same houses are selling today for an average of $480,000 at a 20% increase and to $440,000 with a 10% increase.  So if your income has not gone up as fast as home prices you just lost buying power.   Some Home buyers are feeling this coupled with higher interest rates and many have decided to stay put where they are at.  Potential move-up buyers may re-evaluate his or her ability to better their current living situation with these factors and may chose to stay put.  With rising prices and interest rates some first-time home buyers may have "priced out of the market" and not have the ability to purchase a home.  If you live in a market like Southern California or the San Francisco Bay area these percentage increases will hurt even more people with the higher home costs in these areas. 

Supply of housing is also a huge factor in how fast Real Estate will increase in value.  For example, in Southern California or the SF Bay Area there is only so much land available to build new housing on.  With a limited supply of housing and a large demand for the housing that exists the prices are soaring and in those markets like Southern California and the Bay Area many people have been held out of the ability to buy or even live in those areas.  So we have seen, and continue to see, people and businesses migrating to the central Valley to places like Sacramento, Fresno, Bakersfield, and the desert areas of Southern California.  This migration has caused home prices to increase in those areas to record highs as well.  Construction of new homes in those areas have increased dramatically and continue to do so as long as people and businesses need a place to be.  As we see the creation of more jobs in California we will continue see the demand for those homes to house the workers.  This could also be the demise of California’s housing boom as more and more employers are tired of the business environment in California and are choosing to leave this state.  With more taxes and regulations put on businesses in California we are also seeing a record migration of businesses leaving the state.  Although this is regulating the demand for housing to an extent currently there will become a time in the not so distant future that the business cycle will slow and the California Real Estate Market may be the first to feel a down-turn. 

Which brings up the fact that there is a current migration out the state of people, especially retired folks due to it’s high cost of living.  People are realizing that they can’t retire in this state and are looking to other states that have lower taxes and a lower cost of living to retire.  If this migration out the state continues when the Real Estate market corrects California could feel the pains worse than other places around the country.  However, as long as there are good paying jobs in California there will be people to fill them, but as soon as that changes so goes the Real Estate Markets. 

Going back to rising interest rates and what effects that has on the economy we will see business slowing their expansion for the simple fact that the money to expand is costing more.  This is the whole point of the Federal Reserve raising interest rates in the first place, to slow a hot economy and keep inflation down.  In California we are experiencing that slowing effect now in some industries.  The Real Estate Finance or the Mortgage Business has slowed dramatically with the rise of interest rates cutting out those that may have wanted to refinance to lower their mortgage payment. Although there is the home purchase business that is still good Mortgage companies depend on the demand for money to keep going as people need to mortgage their homes for other reasons that purchasing them, such as bill consolidation, College, home improvement and the rising interest rates have slowed those areas so the financial industry has also slowed.  

Other factors that are slowing the demand are seasonal with vacations in full swing people are looking for fun not buying or selling Real Estate.  The weather could have an effect on Real Estate Sales as the hotter the weather becomes the less people want to go out and look at houses.    This time of year traditionally we have seen the vacation/weather slow-down to around mid-august to September  then it starts to pick up as children start back to school and people have more free time to think about moving.  At MAE Capital Real Estate and Loan we know these cycles as we have seen them occur for over 30 years of being in the business.  We are here to help you buy and sell Real Estate as well as Finance it whether it be a cash-out refinance to pay for college or home improvement or to finance that first home or even that 20^th investment property we have done it all and are doing it every day and look forward to working with you.  Call us today at 916-672-6130 and we can help you with all your questions.