Mortgage and Portfolio Loan Guide

Embrace the Z

“Acceptance doesn’t mean resignation; it means understanding that something is what it is and that there’s got to be a way through it.”

-Michael J. Fox

When you have a powerhouse website, consisting of a wealth of information, that serves as a resource for millions of people, there are going to be some naysayers. I hear real estate professionals and mortgage pros bad mouthing Zillow as if their negativity will somehow alter the house-hunters buying habits.

Here’s the bottom line: When people think about buying a house, they are likely to use Zillow as a resource at some point in the game.

Why fight it? Why discredit a top resource for buyers, sellers, homeowners, etc? Here are a couple of reasons there is some general push-back:

Home Value

Oh boy, here we go. A potential seller takes a look at the estimate Zillow gives them and they are blown away by the equity they have gained in the last couple years. They are so excited and feel they could make a great profit. There is a feeling of anticipation that they will finally have the opportunity to upgrade to the home of their dreams with the proceeds of the sale of their home. They contact their Realtor to list the home.Stop crying about zillow

Now the Realtor (the real-life expert) has an opportunity to showcase their expertise in the market. There is a bit of a let down because of a difference in opinion of home value between the Realtor and the Zillow estimate. But that’s okay. This is where the opportunity lies. The Realtor is able to tactfully explain how homes in the area that are similar to the seller’s home have sold. This is where the Realtor gets to roll their sleeves up and use the facts.

Fair market value is an opinion. Zillow uses formulas to come up with values which are beyond my pay grade, but that doesn’t mean they are going to be accurate. Let’s be real here. If Zillow was right, there would be no need for an appraiser. And even if a buyer is willing to pay a certain price for a home, the appraiser may still come back and give a different opinion of fair market value. Even more interesting, a different appraiser can come up with a different value than the original appraiser.

Why? Value is an opinion! An opinion of how different factors like age, amenities, condition, location, and size can impact the value of a home. Another huge factor is which comparables (recent sales of similar homes within a reasonable distance from the subject property) to use on the appraisal report. When selecting the comps the appraiser is responsible for finding and using the sales of properties that are most similar to the subject property (the home that is being sold). If the appraisal comes in lower than the agreed upon purchase price the buyer will either have to put more down (depending on the loan program, and how much they were originally putting down) or the purchase price will need to be renegotiated between the buyer and seller.

The estimate of value on Zillow is simply a starting point. It’s on the local experts to be effective communicators on their market, not Zillow-bashers.

Pre-approval

A hopeful home buyer can get a pre-approval in minutes on Zillow. The system will ask for general info and pop out a thumbs up or thumbs down so that the consumer can get an idea of where they stand.

The only problem is that there are so many factors that go into a mortgage approval which require an in-depth evaluation of a borrower, and their current circumstances. These instant pre-approvals go against everything I stand for when it comes to setting proper expectations for a home buyer. However, it does give them a place to start. Yes there are disclosures below it that pretty much state nothing is for sure until you talk to your lender, but that is likely to be overlooked because they already see they’re “good-to-go”.

Again, it’s just a starting point. For a true understanding of where you stand, contact your local loan officer. If you did happen to get a thumbs down, and don’t meet typical mortgage standards, here is a great solution.

So why do people use it?

Well first of all, have you seen the Zillow commercials?

The emotion involved in the home buying process is beautifully expressed in their marketing efforts. Their app is easy to use. Not happy home love only can you find upcoming open houses, but also previous tax info, neighborhood trends, estimated payment, etc. You can save the properties you like, and keep browsing. It’s very user-friendly. Are there other websites that offer the same or similar features? Sure, but I promise you they do not have the online visibility and recognition that Zillow has.

There is an advice section on the website where anyone can ask any question pertaining to home ownership. Consumers ask, experts answer. This is awesome because people are able to discuss private matters without having to give out their personal information. This is a huge win for consumers because they can protect their pride, get their questions answered, and not have to deal with a pushy salesperson. It’s a win/win for everyone.

There are some “experts” on these advice forums that really have no business giving advice, but that’s okay too! The consumer is able to weed through the responses, and decide for themselves who is the most credible resource for their particular situation. At that point they can contact the expert through their Zillow profile. Voila, the referral process begins. Best part? It’s free! Now you have two people connecting who may otherwise would not have crossed paths.

The beauty of this is that the consumer is able to do so much research in one place. Is all the information they find going to be spot on? Probably not, but they are able to connect with an expert who will help them connect the dots, and get answers to the questions that were previously a mystery. All this, done from their couch, while sipping eggnog.

Zillow Testimonials

Last but not least, let’s talk about testimonials. Genuine testimonials. They’re huge. You know it, I know it. So wouldn’t testimonialsit make sense to at least ask for a review on the site that everyone goes to when they research home buying?

People want to know what it’s like working with you before they call you. It’s one thing for you to have testimonials on your personal website or your Facebook page. It’s another thing to have reviews posted on a top website with millions of unique visitors on a daily basis. Alexa.com (a resource for web analytics) tells me that Zillow is the 62nd most popular website in the United States, and ranks 235th in the entire world. Not the 62nd most popular real estate website, but the 62nd most popular website regardless of industry or subject matter. Not only that, but average daily page views per visitor are sitting at about 7.9. That’s an insanely high number of average page views in case you were wondering. Hmm, I wonder if having your stuff on there might be a good idea? Just a thought. Either that or you can keep crying to your friends and family about why it’s such a pile of garbage. Up to you I guess.

Here’s the thing, nothing will ever substitute the special interaction between the homeowner and the real estate pro. Don’t be afraid of the world-wide web robots taking control of the planet. The human connection will always be the irreplaceable element in anything we do. As experts we might as well embrace these tools and leverage them to our advantage. There is enough to go around 🙂

Do you agree? What other advantages do you love about Zillow? What are some other disadvantages that you’re not a big fan of?

Adam Lesner | Mortgage Loan Officer NMLS 198818 | Brighton, Michigan

5 Awesome Advantages of Owning Real Estate

Buying a house isn’t for everyone.

The truth is, it’s kind of a pain in the you-know-what to be a homeowner sometimes. If the power goes out, it’s on you bro, better get a generator. If a window breaks, sorry dude, figure it out.

Even though there are some big responsibilities that come with owning a home, there are some excellent advantages worth mentioning!

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Your payment goes toward something.

Yup, it’s called a mortgage. Every month you pay that sucker, the balance of that home loan goes down (just a bit at first). The only time that isn’t true is if you have an interest only mortgage (not a ton of those still out there), where your payment only goes toward interest for the first X number of years. But for the majority of people, their house payment goes toward building equity and paying that bad-boy down.

The alternative? Pay rent (aka pay someone else’s mortgage for them). This leaves you with a lease agreement that you have to stick with, in a house you really can’t change to your liking. The result? You despise writing that rent check every month because you know that even if you did stay there for 30 years, you would still have next month’s payment due on the 1st. Keep in mind, rent typically increases every year. So not only achievement-18134_640would you be paying someone’s mortgage for them, but when it’s all said and done you’ll be paying a higher payment on something that has no liability attached to it. I know, I know, most people don’t rent in the same house or apartment for 30 years. But whether it’s 30 years or 3 years, do you really want your hard-earned money going into someones pocket and have nothing to show for it after 3 years?

I hear the chirping already… “Adam, not all homeowners have equity after a few years of owning. Heck, some were underwater on their homes in 2009 and they made mortgage payments for 10 years before that.”

Yes, you’re right. I am aware of that. Don’t forget, many people put themselves in that place because they used their home like an ATM. Taking cash out of their home to buy a shiny car, or to keep up with the Joneses. I agree with you… if you continue to cash in your equity, you won’t have any equity to speak of. Yes there were other factors that played into the housing crisis like people getting approved for loans they can’t afford, appraisers trying to meet the needs of lenders, and straight-up fraud. But the mid-to-late 2000’s housing bubble was an exception to the rule. Historically, housing prices move steadily (but reasonably) upward.

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Increased sense of pride.

Yes, too much pride can be a bad thing, but being a homeowner is confidence builder. The thought and preparation it takes to buy a home figure-25590_640requires a lot of guts and strategy.

Think about it… You are sitting in your apartment. Channel surfing. You “accidentally” leave it on HGTV while you reply to a few text messages. “Property Virgins” is on, and buying a house looks fun. You suddenly decide that you are capable of buying a home. You Google: How to buy a home. You find a blog that talks about home ownership, and now you’re feeling super geeked. You call a local Realtor, and she asks you if you’re pre-approved for a mortgage. “Pre-approved?. Umm not yet.” Your Realtor insists that you get pre-approved first, and get your ducks in a row.

You ask your friends and family who to call for a mortgage. The next thing you know you’re gathering up your financial identity and giving it to your mortgage guy. You find out there are a couple of things to work on, and it’s probably going to be about 6 months until it’s time to start looking for a home.

You spend the next six months getting your finances squared away, and following your loan officer’s guidance to a T.

  • Paying down your credit cards.
  • Making no large (unverifiable) deposits into your bank account.
  • Get a couple small collections deleted from your credit report.
  • Now you’re ready.

Your Realtor finds you a sick deal, and you make an offer. You negotiate a price that is a win/win for everyone as long as the seller is willing to do a few repairs that the inspector noted. You give your earnest money deposit. It’s game on. Appraisal is ordered. Thirty-ish days later you bring a crisp cashier’s check to closing for the rest of the funds needed. This was pretty much all of your savings, but you saved for this exact moment! To own your home! Now you have the keys, and you feel like you can sit at the big kids table at Thanksgiving this year.

It all started with a little channel surfing mixed with a dose of inspiration.

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Get more for your money.

dollar-499481_640In Brighton, MI and most of Michigan (if not all) you get more bang for your buck by owning your home instead of renting. Let’s look at a quick example. Here is an actual “for rent” listing on Craigslist right now:

$750 / 2br – 775ft22 BR Condo (Brighton)

Great Location. Beautiful updated 2 BR Condo in Hidden Harbour Condominiums opposite Meijer store in downtown Brighton. Central A/C, appliances, washer dryer in the building. No pets please. Water, hot water, trash pick up, Snow removal included in the rent. Available Dec. 1, 2014. Walk to shopping and near x-ways.

Here is an example “for sale” listing on Craigslist right now:

$59900 / 2br – 950ft2TOWNHOUSE for Sale in Brighton

2 Bedroom, 1.5 bath END unit offers extra windows and light, along with added outdoor living space. New Pergo flooring in kitchen and dining areas, also includes newer stove and frig. Newer windows throughout. Large Master Bedroom (16 x 12), and 2nd bedroom (11.5 x 10) both have mirrored closet doors, ceiling fans and lots of light. Finished basement with new glass block windows has built-in storage areas, along with a large separate laundry room. Neutral colors throughout home. Back door leads to private covered patio area, surrounded by green space & trees. Outside area is large enough to entertain and garden.

Running rough numbers on the second one, it looks like $596 including principal/interest/taxes/insurance/mortgage insurance/homeowners association dues

So for 125 more square feet of living space, you pay $154 less per month.

I pulled that up with a few mouse clicks, there are never-ending examples of this.

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Ability to make a house a home.

Take the above for rent listing for example. “No pets please.” It didn’t say no dogs over 30 lbs. It didn’t say no pit bulls. It didn’t say no snakes. Itpuppy-345334_640 said NO PETS.

Why are there so many restrictions on renting? Well, consider this for a moment. If you owned a home, and rented it out, would you want to give the tenant (renter) the ability to do whatever they wish with the property? No? Why? Because you never know how bad they will trash the home. Resulting in you (the owner) having to renovate the property once the tenant moves out. Who knows how much that will cost? Who knows how bad their 1-year-old boxer tear up the carpet? Well ultimately the owner will have to deal with it. So it’s in the owners best interest to be selective on what will be considered when renting out their property.

When you own your home… you decide. You decide on upgrades, pets, colors, etc. You get to make it yours.

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Tax deduction.

The tax deduction that you get from paying mortgage interest is in many cases the largest tax deduction for many homeowners. Unlike credit card and car loan interest that you pay, the mortgage interest that you pay is tax-deductible. Even wealthy borrowers who could pay off their calculator-158109_640mortgage 3 times over with their assets keep their mortgage because of the tax deduction that it brings.

This is a huge benefit for people who look to consolidate some credit card debt because not only does their overall monthly budget improve, but the interest that they pay results in a larger tax deduction. As I mentioned in the first advantage at the beginning, it’s not wise to use your home like an ATM, and take cash out multiple times just to buy stuff. But if you look at it from a common sense standpoint, many times consolidating debt into your mortgage makes good financial sense. If you find yourself refinancing every couple of years in order to consolidate your credit card debt, there is an issue. Might want to chop those cards up so that you don’t find yourself in the same position over and over.

This might be a helpful resource to answer some questions surrounding your possible tax deduction.

What do you think?

Across the United States it is more cost-effective to own than rent in suburban areas. Do you agree? Leave a comment below and tell share your thoughts.

Adam Lesner | Brighton, MI | Mortgage Loan Officer – NMLS 198818

Networking in Livingston County Michigan

I learn something special from everyone I meet.

The young bucks trying to make an impression. The thirty-somethings building their legacy. The seasoned pros with the wisdom you can only gain through a lifetime of persistence and hard work. They all have something special I take away from each interaction.

I attend at least one event or gathering on a weekly basis in Livingston County and southeast Michigan with the goal of connecting with someone. Not necessarily the typical “making connections” with big-wig idea. More along the lines of seeking a genuine conversation with a fellow Michigan professional, and having that “Yup, this is a cool person that I would like to do business with” type of connection.

One event in Livingston County was particularly intriguing. The Livingston County Association of Realtors (LCAR) hosted their annual Education Expo, or “Education Sensation” at Cleary University in Howell, MI. We had the opportunity to be a sponsor for this event, and have a booth like all the other vendors (lenders, inspectors, title insurance, attorneys). What was unique about this event is how there was an incentive for everyone attending the event to visit each vendor booth. When visiting each booth the individual has a “scavenger hunt” checklist they aim to complete. The checklist consisted of pre-written questions to ask each vendor (the questions of course are chosen by each respective vendor). Whoever gets the most correct answers on their scavenger hunt checklist wins a prize!

interesting concept livingston county networking

  • Sponsor an event related to your industry
  • Set up a booth with goodies
  • Come up with a question that you want every one of your prospects to ask you.
  • Ultimately highlighting what specifically separates you from your competition!

Not only do they have to ask you the question, but they have an incentive to write down the answer! Naturally this forces them to not only listen, but it then leads into a memorable conversation. Of course time constraints can limit the effectiveness of the interaction, but you get the point. You are naturally positioned to talk about your business in a way that is unique, and more likely to connect with everyone involved in the discussion (as long as you’re clever with the wording of the question).

michigan first mortgage mug2I didn’t have any idea how powerful that was going to be.

Of course, I was too wrapped up in the preparation of the event, sneaking my business card into each giveaway coffee mug. Little did I know that our heavy-duty coffee mugs weren’t going to have the lasting impact that we were shooting for. It was the quality of the conversations that provided the greatest value. Who woulda thought?

There are so many resources in Livingston County to take advantage of, and help gain exposure for your business. LCAR is great if you’re in the real estate industry. Definitely connect with the Greater Brighton Area Chamber of Commerce as well. They have an event (almost daily) where you have an opportunity to network with local business owners and professionals. Their tireless support  team seems to be truly interested in helping you succeed and grow. Of course the big picture goal in all of this is to create genuine relationships within the community, and change the world! The Greater Brighton Area Chamber of Commerce will surely play a part in that if you’re building your business in Livingston County.