Skin in The Game, and other Real Estate musings
So about two months ago I was showing off a nice 33rd floor Viewpoint corner listing of mine. My listing has since sold for 98% of the listed $384,900 price. That said at the time I had a number of other Agents come and bring their clients to the property. One Agent, whom I had dealt with a number of times but never in person was showing his client my listing while I was there. At the time I asked him where he lived, and he proceeded to tell me that he leases a place in Buckhead. I was really surprised to hear this, and immediately I proceeded to let him know that I found it kind of odd that although he helps many clients purchase condos he does not own one himself.
I mean sure, many shit-bird agents, perhaps young, and perhaps not high specialized, don’t own property. That said, this was an agent who had a better client, and seemed from our dealings to be fairly on it, was leasing in an apartment building in Buckhead. In my book this is like going footwear shopping at Neimans or Saks and the Sales Associate is wearing a pair of Payless shoes. It is just non-congruent. In both my personal Real Estate investments in a number of states I have always asked a potential Agent I would work with “what kind of Real Estate do you own?” If the individual lacked either the funds, self confidence or initiative to purchase their own abode, then why would I delegate them to my business?
As it happens, there is a correlation in poorly qualified (or just dumb) Shit-Bird Agents working with under-qualified Shit-Bird clients (Buyers). In my experience, people with just 3.5% down, who want to do an FHA loan tend to be all over the map in terms of housing preferences, poorly qualified (many just should not be buying a home yet) and in general not worth my firm’s time. Earlier this year, I had a couple of Buyers purchase with FHA loans. In these rare occurrences where the prices in the Atlanta condo market were climbing 5% each of the 1st and 2nd Quarter these Buyer’s made out very well with their leveraged bets. Given the large increases in price I started to reconsider my overall position which is Anti-FHA loans. That said, now that price increases have started to moderate, I am now going back to Anti-FHA deals. If you don’t have 10% down, or a pretty darn good reason not put to 10% down, then I would argue save until you have 10% down.
An FHA loan now has a hefty 1.25% up front charge at closing, then the PMI (which is not tax deductible) is monthly, expensive, and a real waste of money. I have always opted for 15 year loans (with at least 20-40% down), or cash for my Real Estate purchases. Many first time Buyers buy with a 30 year loan and think that just adding to their payment will be the same as a 15 year loan. That simply is not the case. At today’s rates a 30 years loan you will be lucky to knock much more then $100 or $200 a month in principle on a 30 year loan. Looking a the same loan as a 15 year mortgage, the first payment at today’s rates is more principle than interest. I always encourage people to pull up the actual amortization schedules for their prescribed loan amount and then they will see what I mean.
I am a Real Estate investor and Landlord first and foremost. My brokerage business is a highly profitable hobby which enables me to work with people from all over the world with a variety of fun backgrounds. My point in these musings is that if you are seeking Real Estate (or I suppose new footwear) it is important to work with someone who speaks the lingo and has skin that particular game. In the Broker side of Real Estate it is too often that I encounter people representing others who do not. Skin the game is an important aspect and I encourage all potential Buyers and Sellers of Real Estate to consider it.
