Archive for April, 2007
Today’s class started off slow with the instructor promising to teach us how the money supply in the country works. Our instructor lamented the painful 8+% interest rates of the late 70s and 80s that made buying a home difficult. Seeing how rates fell so drastically a few years ago, it would appear to be a no brainer to buy a home NO MATTER WHAT THE INTEREST RATE IS as long as you can afford the payments, because you will more than likely be able to refinance at some point.
It is intriguing to imagine what the home market would be like today with a 20%+ interest rate, yummy…
Many of my readers are probably already familiar with adjustable rate mortgages. These often allow you to pay a reduced payment for the first few years (often with the mortgage amount actually growing) then with a hefty rate adjustment once the original low payments ended. This can really hurt those who don’t fully understand how these work. I have personally found some mortgage companies try to trick me into using an ARM over a 30 year fixed.
After some time listening to the instructor reminisce on past rates, he suggested that we get 15 year loans, and that we use his brokerage’s mortgage company for getting our clients loans. Apparently, we’re just not going to do any better than to go through them. That’s pretty convenient if you ask me!
In class our instructor mentioned several times that they fired one of the secretaries here. It would appear that there is a high demand for real estate assistants, as the offices where we are schooling have lots of ads, and seem to be advertising in local papers as well, in an attempt to find some good help.
They obviously haven’t heard of Craigslist, given that there probably aren’t five computers in the whole office.
I found all of this hilarious as he went into depth on why they fired the secretary. Apparently, no calls came to the offices for several days. Suspiciously, the real estate agents began to call their own office line, and received a busy signal. Turns out, the new secretary was using the internet…without realizing that the office uses an old-fashioned dial-up line for their internet connection AND their phones.
So they fired the secretary, who seems to have been the only net savvy one in the office. The poor girl probably didn’t even realize that the office phone line and the internet line were one and the same. I mean really who still has dial-up in their office? And on their main phone line at that!
And now they can’t figure out how to find another secretary to hire because no one knows how to use the internet.
I decided to find out just how much of the test I could wing, and get some feel for how hard the test will be.
The School here requires that the students take a practice final before allowing them to take the real state exams. You must get at least an 80% on the tests, which in the eyes of the school, guarantees you can pass the state and national tests which require 70%.
I took the tests with 19 classes completed, so just over half done. I was hoping I would ace them, which would mean I wouldn’t have to study these thick books.
No such luck. I found myself confronted with questions about redlining, 90 day mechanic liens, and dozens of different dates which you must memorize…pity.
So I’m going to have to hit the books harder and see what I can do to ace these. Oh and a bit of advice, which will sound humorous coming from me…bring a calculator. Or at least some scrap paper! I think I suffered a few missed problems using my fingers to calculate how a mortgage amortizes.
My scores? 69% on the national (1% away from 70!!!) and 61% on the Utah state exam (still had a lot of state classes to finish.)
I retook the Utah State test after taking another two classes and got a 69%.
I’m going to study lightly and finish the courses and see how I do.
Continuing from Lesson 25, we were told more stories about our instructor’s vast rental experience and actually covered some of the material regarding how to be a property manager and deal with renters/
We were told that it is difficult to budget for property management. This is true as stuff happens. Things break, and cost money to repair. Utah does NOT require one to maintain anything other than code violations and threats to life and safety.
Class started with a small argument as the teacher accused on the students of illegally managing other people’s property without a license. Agents seem bitter about this, since it probably seems unfair that they had to get their licenses, but hundreds of people manage illegally without doing so.
Our instructor confessed that Utah has less use for property managers than other states, as people here are very do-it-themselves…’cheapskates’ as he called them.
The rental market (like the home market) is hot right now. Rents are up roughly 25% over the last 6 months, and our instructor confessed that he plans to bring his rentals up to $700-800 for 2 bedroom units.
This is quite a bit higher than the $500 that many of these units were renting at two years ago.
He smiled as he told us that he likes to have his secretary call the larger apartment complexes and feign interest in learning the next year’s rent, and then he prices his rents slightly lower.
We were told that we can judge if our rent is too high or low based on the amount of demand and interest shown in a given price. Our insctructor told us that he’s tried to avoid renting BYU approved places in Provo, because BYU requires all sorts of difficult requirements of landlords (including prohibiting court action on tenants).
This can be difficult, as mediation tends to assume that both sides deserve something, so if a landlord is owed rent, chances are mediation is only going to get a partial collection.
He told us that he’s now in the process of buying a 24plex, which caters to immigrants, who he exclaimed are his favorite tenants.
He explained that the best way to check on a potential client and always get your rent is to charge $20-35 for a background check (which our instructor then credits to the rent if they pass). This he claimed, will discourage many undesirable applicants.
We were reminded that in order to keep good tenant relations we should in fact ALWAYS charge late fees. You must be uniform in your treatment to all tenants or risk offending the others.
I have dozens of classes to complete as well as some pretty fun stories, so stay tuned. I’ll do my best to keep things updated daily, and get a few more posts up to make up for the vacation in California.
Speaking of which, the market is still very pricey in SoCal. I was visiting a friend in a neighbourhood I remembered as being particularly bad, and stopped to grab a for sale flier in front of a small condominium.
It stated that they would accept and consider all offers from $520,000-$559,000. I had to laugh. This was 3-4 times more expensive than a very nice condo in the best neighbourhood here.
And WHY would anyone submit an offer following the suggested offer range? It seems ridiculous to put a $40,000 price range on a flier.
I also spent some time in Vegas on my way back. The market seems to have slowed there as well, perhaps even worse than in California. All along the highway we saw billboards offering amazing promotions and builder incentives on new homes. Offers such as $40 closing costs, with 40% of the first year’s mortgage covered by the builder were being tossed out like pancakes…cheap pancakes at that.
So they overbuilt Vegas, there might be an opportunity there. Me, I think I’ll sit back and watch before shopping.
I’ve changed the title on the Blog to hopefully reflect the direction I want to take this. I don’t hate real estate. I find it fascinating. I do think the industry needs reform, but as has been commented, there are bad agents and good ones out there. I appreciate the existence of good agents. I hope they’re making the money they’re worth. I just fear that the industry has devolved into facing a ‘bad waiter’ crisis.
The ‘bad waiter’ comes to exist when a waiter or waitress realizes that they can work their rears off to net a modest tip income, or do as little work as possible and STILL GET TIPPED by people who are too embarrassed to tip poorly.
Good waiters continue to exist, but the bad waiters are still getting paid, and often have little to no incentive to work harder. It seems to be the same with Real Estate agents. Why work harder than is necessary if you get the commission either way? And lets be honest here, which is more important, the client or the commission?