Harry Ridge

The National Association of Realtors® (NAR) would like to tell you that all agents are honest, ethical, experienced and care deeply about their clients, but is this necessarily true? In my experience it is true about most of the Realtors in the DFW Homes business, but unfortunately, it's not true about all of them. There are some real estate agents out there whose sole purpose is to make as much commission as they possibly can, as quickly as possible, with little regard for the clients best interest. The challenge is that some of these agents look and act just like professional, ethical agents, so it's hard to tell them apart. This confusion can also make some first-time home buyers overly suspicious of the very Realtors that are supposed to put their client’s interest before their own. These first time buyers may wonder if they would be better off without an agent. Some of them may think they can buy their first DFW home by themselves and fare better.

This is unlikely. Most first time home buyers generally have a job or a business that has nothing to do with real estate, so they tend to know very little about it. Most professional Dallas Realtors are in the business full time, so they acquire more and more knowledge every day. The business of real estate is complicated, filled with legal paperwork; it requires expert negotiations and there are often problems which, if left undetected, can blow up into huge proportions that jeopardize your entire transaction. This also holds true for first time home buyers buying Dallas foreclosures. My advice for first-time home buyers is to retain a buyer’s agent to work for you and represent your interest 100%. In almost every case, the seller pays the fees for your buyer's agent, so it costs you nothing at all.

Hiring the Seller's Agent to Buy a Home

It is little known by most buyers but there is something called a variable commission, which makes some buyers think they will get a better deal by dealing directly with the listing agent. This variable commission only benefits the seller by saving them commission money. It would be naïve to assume that the seller will pass this savings along to the buyer. More importantly, the listing agent represents the Seller, not you, the buyer. The chances of you coming out ahead by dealing directly with the listing agent are slim to none. Hire a buyer’s agent to represent your interest and protect you, this is really the best deal.

Hiring a Buyer's Agent to Buy a Home

As I mentioned before, a buyer's agent represents you and the seller pays for this representation. It’s a no brainer for any buyer. A buyer's agent fiduciary responsibility is to look out for your interests first. A buyer's agent's duties are to:

· Tell you the truth

· Negotiate on your behalf in your best interest

· Fight for the best sales price, terms and conditions that match your criteria

· Anticipate challenges and head them off at the pass

· Disclose defects the agent can see

· Provide you with the seller’s disclosure and all documentation to which you are legally entitled

After you've bought a few homes and are used to the process, you might not need to hire your own agent to buy another home. But for your first home? Absolutely, hire a buyer's agent. Besides, you'll find that agents who specialize in working with first-time home buyers tend to derive a great deal of personal satisfaction in providing superior customer service and making their buyers' dreams come true. Those are good qualities in a buyer's agent.

You have seen all of the articles that say this is this best time, probably in our lifetime, to buy a home. If it is the best time to buy a home for yourself then is it a good time to invest in Plano Real estate? If you're financially able to spend time doing research, and you have cash to burn, then investing in real estate is likely to be a good financial decision for you. There are a number of excellent reasons for a part-time real estate investing business.

Can you can do real estate investing part-time: Yes. Before the Internet, this wasn't as easy thing to do. Now you can do your own due diligence which used to be the biggest time consumers in real estate investing. The Internet has opened the door to anyone with limited time to spend on the process. What used to take a full day of tramping through courthouse offices in any DFW real estate city and looking through several dozen records can now usually be accomplished in an hour or so on the Internet at any time of day or night.

Costs have nothing to do with income: Doing everything right in the real estate investment process and getting tenants into the property will not guarantee success. An unexpected vacancy or two for longer than anticipated has ruined many new real estate investors. The mortgage, property taxes, utilities and upkeep costs continue, even when the rental income stops. At those times of stress, regular income from the property is nonexistent and you will be paying these costs out of your own pocket. Even when buying Dallas foreclosures where many times your initial investment is less you can still find yourself in a negative cash flow situation.

Don’t make investment decisions under stress: Getting into a negative cash flow situation creates much stress. Too many real estate investors have lost money selling properties at the wrong time for the wrong reasons. Keep your whits anytime you have to make a decision about your real estate investment.

Is Starting Part-time easier? Taking on your real estate investments slowly and carefully at first may save you financially when you find it's not as you expected. Real estate investing part-time is definitely the way to go for most investors. Keep that steady income for stress reduction and backup funding. As you learn the business and grow your rental property portfolio you may find yourself someday where you can simply walk away from that job that you detest.

Below is some great information about rental properties:

· Property improvement for increased equity - Many investors purchase properties at a discount because they could use some improvements in condition or amenities. They have calculated that the value of the improvements will exceed the cost, resulting in an immediate increase in equity.

· Rental yield - This is the percentage yield from direct rental income, and can be calculated as either gross or net. To calculate the Net Rental Yield, take the expenses, taxes and other costs into account, and divide by the property cost/value. It could turn out to be a negative cash flow, as it doesn't take mortgage payments into account. Many investors prefer to look at the cash-on-cash yields. Though the investor can purchase and manage for a yield on this single component that exceeds average stock or bond dividend yields, it is only one of the ways in which real estate returns on your investment.

· Appreciation - Properties normally appreciate in value as inflation increases. Increased value can mean sale and reinvestment in higher valued properties. This is the second, and a historically proven value component of real estate investment return.

· Inflation – Rent Friendly - Rents generally increase with inflation, while mortgage payments on the property remain stable. This increases cash flow, with more rent income without increased expense for holding the property. When inflation is up, it can also mean more renters, as the affordability of homes can be negatively impacted by inflation. More renters increases demand, so rents will generally increase.

· Leverage - Using leverage provides much greater returns. Using $200,000 to purchase three properties with down payments, instead of one for $200,000 cash, can greatly increase your returns. Keep in mind that all leverage involves risk, so the successful investor must understand how this leverage will impact their real estate investments.

· Paying down the mortgage - Amortization, or paying down the mortgage, frees up more investment resources to increase leverage. Some investors use increased equity in one property to free up funds to invest in others. One of the best things about owning rental property is that your tenants are the ones paying down your mortgage.

Every year I get my copy of the local Profile of Home Buyers and Sellers. This year I want to share some data with you about how buyers are finding Plano homes that they ultimately purchased. I am talking about how they first started their home search that resulted in them finding the home they ultimately purchased. The data takes into consideration two types of buyers: those who used the Internet for home searches, and those who didn't. This included both regular Plano homes and Plano foreclosures. By also asking those who didn't use the Internet for home searches, we hope to get a more balanced picture of the value to both types of buyer of both websites and traditional “regular” media. Here are some of the results:

· 83% of those who used the Internet ended up using DFW Realtors to purchase their home.

· Of those who used the Internet, 37% found the home they bought on the web.

· 33% who used the Internet found their home through a professional Realtor.

· 38% of those who didn't use the Web found their home through a professional real estate agent.

· 2% who used the Internet found the home they purchased in a newspaper print advertisement.

· Only 1% of both Internet and non-Internet users found their home in a real estate book or home magazine.

You can see trend is clearly moving from traditional marketing to online marketing. One of your main concerns should be the return on investment of your marketing dollars. And, the data shows that the Internet is a very useful tool for home buyers. Also, the huge majority of those Internet home searchers ended up using a Realtor to assist them in their purchase. There are two very important points to be made here:

· Internet searches are the primary tool of today’s home buyers.

· Realtors are still very valuable to the home buyer and the home buying process.

It would be logical to assume that home buyers are definitely searching and locating homes on the Internet, but what can we assume about how they found the ultimate choice for a real estate professional? Unfortunately, there isn't any data to tell us the percentage of real estate agents chosen from their web presence. My opinion is that the Internet has become an extremely important tool to the home buyer, but they are still using real estate agents for their purchase. It is logical that we want to present an effective and useful Internet presence to attract buyers to use our services. Yes, many will still choose the personal referral route, but we all need to be aware that the Internet is growing as an extremely strong marketing force, while traditional media is shrinking. This means more and more of your marketing dollars should be going to your online marketing budget.

What are “absorption rates” as they pertain to real estate sales? The absorption rate takes into account how many homes are on the market and how long, on average, it will take that home to sell on the open market. Professional Plano Realtors and DFW Realtors have a duty to their Seller clients to explain this calculation so they will have an idea about how long it may take them to sell their home. Whether you are at the listing presentation, or you're following up with a seller who's been listed a while, providing the added service of helping the sellers to understand absorption rates and how their price falls into the current pool of available homes for sale in their area. Absorption rates are now required from appraisers for all government related loans; which is just about every loan out there today.

Fannie Mae's Form 1004MC, and Freddie Mac's Form 71 both require that appraisers calculate days on market, inventory levels, and absorption rates for the comparables and immediate area around the subject home. The assumption is that tracking the variability of these three measures across time periods can provide trend information to determine home value direction. The appraisers must also take into consideration the Plano foreclosures on the market which could impact the absorption rate.

Absorption Rate Calculation Example- Say we take the number of closed sales for the last six months in a certain area, and it is 110. We then check the current number of active listings, and it is 420 in that area. First, divide the 100 sales by 6 months, to get a rate of 17 closings per month. Then, divide the 420 active listings by 20 to arrive at 21 months to move that inventory; that's the absorption rate.

Under the Freddie Mac's Form, we see that they require this number for three time periods; the immediately preceding three months, four to six months back, and seven to twelve months in the past. Then, the appraiser must indicate whether the absorption rate is decreasing, stable, or increasing. If it's decreasing, then the market appears to be slowing, and this could cause the value of the home to be adjusted downward. Also considered are corresponding periods for days on market, inventory, and the sale-to-list price ratio. If sale prices are getting lower in relation to list prices, this will be evident on these addendum forms, and the appraiser should be adjusting the home value downward. So, it's clear that a good market is showing higher absorption rates, lower inventories and shorter times on market on average. They prefer to use "median" numbers.

On the bad side, if median absorption rate is declining, and days on market and inventory are rising, this doesn't look good for the market in the near term. Couple that with wider spreads between list and sale prices, and the picture darkens as well. But, good or bad news, you should be on top of this information and sharing it with sellers and prospects to help them in their decision processes.

In this real estate market there are many Dallas homeowners who have very little equity in their homes. If they find themselves in a position where they have to sell their home every dollar counts especially when it come to sales commissions. But can you really save sales commission dollars and get the market exposure that your property needs and the proper representation you need to ensure that you aren’t being taken advantage of? Is someone watching out for you to make sure all the local, state and federal laws are being complied with? Is selling Plano real estate the same as selling a Dallas foreclosure property? Do the rewards outweigh the risk of using a discount Dallas Real Estate Company?

The answer, in most cases, is yes but only if you are careful and do your due diligence. Google Dallas FSBO (For Sale by Owner) real estate companies or Dallas Flat Fee real estate companies. Study several of their websites and compare them. Cost should not be the only determining factor as many of the “cheap” programs do nothing more than stick your property in the MLS and on some websites. Look for a comprehensive program where your property gets full market exposure and you have full representation through closing. Many of these programs cost between $1,500 and $2,500 but do the math. You will find that using one of these discount Dallas real estate companies will save you thousands of dollars.