New Housing Dynamic - Pt 2

The first person I would like to address in what I called in my last blog the “New Housing Dynamic”, is the home buyer. Without the buyer we have nothing. You can have all of the sellers you want, a million real estate agents, a million loan officers, a million appraisers etc etc etc but without the buyer we are all like an SUV plant in 2008, useless and not producing a thing. Hey that could be a new joke...how are a subprime lender in 2008 and a SUV plant in 2008 alike? Both are gone for good! Okay my comedy days are over. Sorry, back to the buyer.
What has changed about or for buyers in this new real estate dynamic? Well it isn’t the availability of homes, there are still tons out there for them to choose from. Prices aren’t too high (anymore) in fact if you ask a lot of sellers they are to low. There is a ton of capital, as in money, available for them to borrow. So what has changed? Well let’s go back to the money thing again. There is plenty of money available for qualified buyers. What was that? Ahhhh qualified…..there is the “New Dynamic”. Let’s take a look at it.
The loans officers I normally work with have always talked about loan criteria being the four C’s. These four C’s represent character, capacity, collateral and capital. In other words does the potential buyer have a good credit score (character), capacity (income/job), collateral (did the house appraise) and capital (down payment). As we all know in the past few years you probably could have gotten a loan with only a passing grade in two of the four C’s or in some cases only one passing grade. If you said you had a job and a dollar in change in your pocket you got a loan. Don’t laugh. You know it’s true. Well I have changed the name of the four C’s. That is no longer a valid term in the “New Real Estate Dynamic”. The proper term for that same financing test is now ACID. That’s right the ACID test. ACID stands for A=appraisal, C=credit score/report, I=income, D=down payment. Starting today let’s call it what it really is and that is the ACID test. If our buyers do not pass the ACID test there is no sense in driving them around in our new scaled down vehicles wasting our $4.00+ gallon gas trying to find their dream home if they cannot get the mortgage. It is not worth the gas or the buyer’s time or the agent’s time. The ACID test must be passed first. Some agents will say I did that in the past and that is true. However, at the same time there were a lot of agents who found the buyer’s dream home first and then worried about the mortgage later since they knew that mortgages were easily had.
So now what? If the buyers do not pass the ACID test they should just walk away with their unfulfilled dreams of home ownership and the agents let them do that? NO! WRONG! In my opinion agents, if they are true professionals, should have a team behind them. One of the major team members they should NOW have on their team is a credit improvement specialist. Buyers should expect agents to assist them in ALL aspects of obtaining their dreams home ownership. Professional agents are not just chauffeurs driving buyers around. They truly never have been but the “New Dynamic” is making that more obvious than ever. Real estate professionals should have all of the resources available to assist buyers. As evidenced by a recent NAR survey almost 75% of buyers want all real estate related services under one roof. Agents need to understand and provide that. This credit restoration/improvement specialist can help with both the C and D in our ACID test. They can help with improving credit scores and through this mechanism allow the buyer to reduce their cash outflow by refinancing auto loans and credit cards to lower interest rates. It can and must be done. It is part of the “New Housing Dynamic”. I could go on and on about lower PMI, lower mortgage interest rates lower this and lower that, that is associated with credit improvement but my fingers would get to tired of doing all of that typing.
There are plenty of people with the dream of home ownership. There are plenty of people who dream of and need a bigger home. One of the new jobs of the agent in our “New Housing Dynamic” is to show these potential buyers how to fulfill their dreams. A helpful link is shown below.
More on the “New Housing Dynamic” next week. Have a great weekend.
Ron