The convenience truth…

This is all we’ve got … one planet

The other morning I came across an article in the Washington Post regarding the melting glaciers in Peru. It is safe to say that for the majority of my life, I never would have bothered to read the article.  Peru is so far away and the fact that they have glaciers melting would not have triggered any interest on my part.

Fortunately, for me and everyone connected to me, Peru is much closer to home now.  I have spent the last three years of my life in a relationship with a woman that was born and raised in Lima, Peru.  She did not just bring herself into the relationship.  She brought along a culture that is deeply rooted within her.  She brought along her essence, and I became so much richer for the experience.

I was born in Washington, DC and have been a resident of the DC area all of my life.  I went through life believing that I was an American.  Today, I understand that America includes North, South and Central America.  My vision of myself and my country has been altered somewhat.  Today, I understand that those that live in the land of plenty have taken so much for granted that they fail to see the convenience truth.

The first shock to my sensibilities occurred when my woman shared her history with me.  I learned as we shared with each other.  My story regarding the horror of Kent State and the National Guard patrolling the streets of DC at various times were countered with her memories of living under military rule with tanks in the streets and bombs going off on a regular basis.  She shared things that are incomprehensible to most people born and raised here.

People in the United States of America blindly have faith that when they turn on a spigot, water will emerge. It is a given.  It is always there.  We have spigots in the kitchen, the bathrooms, the powder rooms, the laundry rooms and outside of our homes.  Turn the spigot and voila, water flows.  One morning, I was shaving.  I left the hot water running while I shaved.  When finished,  I was confronted ( in a gentle manner ) by my lady and she asked why did I leave the spigot running?  Wouldn’t it make more sense to turn it on and off as needed?  I didn’t bother, it was more convenient to leave the water running. This is a convenience truth … it is easier to waste water than conserve resources. In the aforementioned article, people shared that a 3 hours walk to get water has become a 6 hour journey now that the glaciers are melting at such a rapid pace.

One night, I came upstairs to my office to handle some emails.  I left the television set and lights on in the family room.  I had full intentions of going back down when I finished my work.  My dear lady came in the office and asked if it would be possible for me to turn the t.v. and lights off if I was not using them. I thought about it. Electricity is always there ( barring a storm ).  Flip a switch or press a button and voila … you have power.  Then I realized that leaving electricity on when I was not using it was kind of stupid.  I had left everything on because it was more convenient.  This is a convenience truth … it is easier to use up available energy than it is to conserve natural resources.

We spent one of our early afternoons together going through all the things I brought to the home.  Boxes and boxes of stuff.  Stuff I wanted. Stuff I bought. Stuff I forgot I had. Stuff I had bought twice or more. Stuff.  Together, we decluttered so there would be room for my stuff and her stuff.  When the sorting was done, we hauled what we did not want to the landfill.  She was stunned. For as far as the eye could see there was stuff. There was old stuff, broken stuff, discarded stuff and some almost new stuff.  There was so much discarded stuff it made it impossible to believe that there could be an imbalance of trade or the economy could be bad. Somebody paid for the stuff. Now it was in a landfill. It seemed pretty apparent that consumerism was rampant.  This is a convenience truth …. it is easier to buy new than look around and see if you really need what you are buying.

Left overs are a regular part of our dining experience.  There was a time when I would not think of saving left overs.  I certainly didn’t take “doggy bags” home from eating out.  It seemed to be much easier to just cook something fresh than it was to re-heat last nights dinner left overs.  Left overs were not “fresh”.  I never stopped to think about how much money was being scraped into the garbage. Here is a convenience truth … it is easier to buy a prepared meal than it is to heat up leftovers.

I am a full time Realtor.  She teaches Spanish at a private school and works with me in real estate as time permits.  Her mom and daughter live with us and we expect her college daughter to join us in the spring.  When working, I am used to seeing abandoned homes, trashed homes, empty houses.  Our throw away culture has grown to the point where we actually throw away homes.  To some, these homes are just blights on the landscape.  I look at them and see the incredible architecture, the craftsmanship that went into building the homes.  Where others see rot and decay, I see a framework for a home.  It is more convenient to leave them empty and falling down.  Here is an convenience truth … we would rather allow neighborhoods to decay than take the time and effort to take care of existing buildings.

The Amazon is the lungs of the world.

So where is this going.  The inconvenience truth is rather ugly.  Glaciers are melting.  Greenhouse gases are continuing.  Politicians spend a great deal of time in meetings and committees and blowing hot air.  Rather than do what we can to preserve the earth, we point fingers and attempt to assess blame. It is easier to discuss a problem than it is to take corrective action.  Here is a convenience truth … it is easier to enjoy convenience and be wasteful than it is to conserve our natural resources.

I spent the majority of my life, ignorant to the impact that my lifestyle was having on the world around me. I grew up in the land of plenty.  It took life lessons from someone that grew up in a different place, in a different culture to open my eyes to the convenience truth.  There is only one planet.  The oxygen created by the rain forest in the Amazon is the very air that you breathe.  One of the sources of life for that rain forest are the melting glaciers in Peru.

If we fail to begin to conserve our resources, one day you will turn the spigot and nothing will appear.  If we do not change that rate in which we use our energy resources, one day you will flip the switch and nothing will happen.  If we do not begin to live within our means ( very old saying … buy it new and wear it out, pay with cash or do with out), one day we will find our currency is worthless.  If we do not change our wasteful eating habits, one day there we may go to the cupboard and the cupboard will be bare.  If we fail to maintain the buildings that exist, we may never find a way to provide shelter for everyone.  If we continue on the wasteful path we are following, we may wake up to discover that there is nothing left to waste.

This is for my children, and their children and all the following generations.  I may be a much better person today because Lourdes Tudela welcomed me into her world, but her legacy will be that she opened the eyes of many to a better world.  I only hope that those that read this will look beyond jingoistic rhetoric and understand that for us to truly be a world leader… we have to lead. And that my friends is the convenient truth.


If you swim away from shore, you will never reach dry land.

There is another thought that comes to mind. It is “”Those who cannot remember the past are condemned to repeat it.” – George Santayana .

Somewhere between the two there is hope for tomorrow.  It must be human nature that causes us to react to tragedy by seeking someone to blame and as a group pointing our collective finger at them.  This reaction was brought to light by the tragedy in Arizona.  It certainly was a made for media event. A judge, a congresswoman and a child and others fell victim to a senseless shooting.  Forensic evidence was still being processed when the finger of blame began making it’s way across the political spectrum.  There may be some validity to the charges that our once civil discourse has moved to a rather base area.  It is no secret that de-sensitizing an entire society has repercussions. I am neither judge nor jury, scholar nor academic.

I do believe that there is a connection between “Roe v. Wade” and the reduced value on life that is exhibited in the violent deaths that occur in our inner cities on a regular basis. Of course, that would be the subject of an entirely different discussion.

It is the start of a new year.  Somehow, lots of people think that January 1st is some sort of bench mark.  Society does not pause, nor does it change course at the stroke of midnight on December 31st.  We are fluid. We can change. We do not have to remain shackled by the mistakes of yesterday. We can move on and make tomorrow better.

As famous as the “Moon dance” by Michael Jackson was, most people did not stop to realize he was looking one way and moving in the other.  The brilliance was in his movement, not his choice of direction.  Focus. His focus was on performing and ours was on the performance.  No one stopped him and said “legs are for moving forward”.  People have walked backwards since man stood erect. He just added style.

The same can be said for mortgage lenders, appraisers, real estate agents, investors, buyers and sellers,etc. that were involved in a real estate transaction during the last five years.  People have been doing exactly what they did since the first real estate transaction was recorded.  No one stopped them. No one stepped forward and asked the all important question – what will be the consequences of your behavior.

We have remained frozen in time.  We have continued to, pardon the expression, “beat a dead horse”.  We spend days, weeks, months and now years attempting to analyze what went wrong.  We are not just remembering the past, we refuse to let it go and move on.  We spend so much energy trying to fix blame, we have little energy left for moving past the mistakes.  It would behoove those in the industry to stop dwelling on yesterday, look at where we are today and take action so that tomorrow is better.

Today interest rates are low but qualifications for loans are more stringent.  Rather than bemoan the tightening that has occurred, we should be marketing to those that still qualify. They do exist. Houses are still being sold every day.  The requirements for acceptable “flipping” have changed. Rather than just walk away from the market, investors should be retooling how they buy and sell.  It is a much harder market.  Agents for years have bemoaned the plethora of agents that are licensed.  Today, you have to know what you are doing to survive. Darwinism has reached into our profession. Rather than complain, it might make more sense to be proud that even in the toughest of times, you are still working.

You have every opportunity to become a leader.  You have every chance to reach out to those that need your services.  You have success before you.  Stop dwelling on the past, stop swimming in the wrong direction.  Turn to the light.  Accept today for what if offers and focus on how to make it better.  Historians will handle the past.

They want to sell you the house…(now I earn my money)

This is your goal

Well, you have finally decided on a home. You have visited several homes over the past month or so. I have been by your side, watching you, listening to you and helping you narrow your search until you found “the one”.  Sure, there has been lots of frustration.  You remember the homes we visited.  We went over the listings together.  I tried to tell you that “needing tlc” probably meant more than a paint job. You discovered that people do strip homes.  You followed me over hill and dale viewing homes.  You probably think I was earning my money then.  Not really.

Time for the offer.

Now, the house is listed at $250,00.  Homes in the area that are comparable size are selling for $250,000 to $260,000.  The home seems to be priced correctly.  It has been on the market for about two months.  You mentioned that you felt pretty comfortable with the home except the carpet was old and one bedroom is painted lipstick pink.

What sort of offer would you like to make?

Well, in this market we can probably offer a lot less can’t we?  I mean were going to have to spruce it up when we move in. How about we offer $225,000 and ask the owner to give us an allowance for re-carpeting the home?

They want to sell you the house…(now I earn my money).

As I showed you, the home is priced fairly for this market.  The seller has apparently done his homework and priced the house accordingly.  I don’t think offering less is the best idea in this situation.

Oh please, we know the home is worth $250,000 but everyone knows that they aren’t going to get full price today. What about the nasty carpet and god awful pink room. They must know that they won’t get what they are asking.

I hear what you are saying.  Can we step back for a moment and look at the sale from their perspective?  When they first decided to sell, I have no doubt they thought they could get more than they are asking for the home.  They live in the house and have accepted that the most they might get is $250,000.  They probably don’t see a nasty carpet, it did not get that way overnight. They have lived with it that way gradually.  That pink bedroom is pink because they most likely think it looks good.  You don’t think for one minute that they said to each other, “let’s paint the room pepto bismal pink. No one will like that color”.  Let’s keep in mind your goal is to buy the home at the best net price.

Well, then what would you suggest?

Well, what if you offer $245,000 and ask for $7,500 in closing help.  The seller will be getting pretty close to his asking price and closing help is much easier to accept than asking for money to replace carpet and paint a room.  Your goal is to have the offer accepted.  My goal is to assist you in preparing an offer that does not insult the seller and also gives the seller some wiggle room.  We have agreed that the home is worth $250,000.  An offer of $245,000 may be acceptable. The seller may even accept the price and give the closing help.  If the owner says no to the price and yes to the closing help, your net cost is now $242,500.  Regardless, your offer allows the seller to feel good in accepting it.

Well, if we go that route, what protection’s will we have in the offer?  What if something is wrong that we did not see when we visited the home? What if our loan falls through? Are you suggesting that we just blindly make an offer and give them an earnest money check and hope for the best?

You will be protected. You see the offer will include several contingencies ( check points if you will that must be satisfied before you close the transaction). If any one of the contingencies is not met, you can void the contract and receive your earnest money back.  Your offer will include a financing contingency that clearly states you must get the loan in order to close, an appraisal contingency that protects you should the home not appraise for the sales price, a home inspection contingency that will afford you the opportunity to have the home inspected by a licensed inspector and if you do not like the results you can void the contract.  I will be with you throughout the process and I will explain your options as every contingency is dealt with.

Well, I guess you have done this a lot more times than we have. Let’s go over the paperwork and get everything signed.  How soon will we know?

The offer will be made with the stipulation that we need a reply with in 48 hours.  I will deliver the offer and stay in contact with the listing agent to make sure you receive an answer in that time frame.

Remember, they want to sell you the house…(now I earn my money)

John MacArthur


If tomorrow never comes

The real estate industry is changing.  Buzz words like “traditional broker”  and “brick and mortar office”  are creeping into discussions about what used to be.  New thoughts and theories abound regarding the direction the industry will take as recovery from our 5 year nightmare begins.

What will tomorrow bring?

I can only guess.  If you step back and look at other industries, you can see that change is inevitable. The economies of scale has been accused of creating a landscape that is hostile to “mom and pop” companies from coast to coast.  I am not an economist.  I do understand that in most cases, profit is king.  The entertainment industry underwent a transition over the last 10 to 15 years.  Vinyl was replaced with 8 track which was replaced with cassettes which was replaced with compact discs which are being replaced by mp3’s.  The distribution system used to be record label to distributor to warehouses to retail warehouses to retail stores to shelves and out the door.  Today there are few distributors left and shipments are made directly to stores.  Record labels shut down regional offices and everything became a small circle with only very large players.  Those living in the DC area will remember Super Music City, Kemp Mill Records and Tower Records.  They could not order enough product to get the attractive pricing enjoyed by national chains. They lost money. They are gone.  The same sort of shake out has occurred in many industries.

Sign of the times

I had the opportunity to see life on the other of the fence.  Long and Foster appointed me “acting” manager of their Olney office in the Spring of 2009.  I got to witness first hand the frantic in-fighting that occurs behind closed doors. Traditional brokers face a changing landscape that not only includes a market that is filled with uncertainty but direct assault from other players that want to get into the business.  Firms that own more buildings than they can afford to maintain find themselves in the same dilemma as their clients.  Values have plummeted.  The value of commercial property has taken the same sort of hit that residential property has suffered.  The resources to maintain multiple offices are directly related to sales and commission splits with agents.  Brokers are faced with mounting expenses and less income.  Something has to give.  The fall out from the situation is seen across the country as “mom and pop” brokerages shut down and larger firms close offices.  Buzzwords abound that attempt to paint an optimistic slant on the changes.  Firms that do not come up with new plans will either be sold or shut down.

Banks have visions of becoming brokers dancing in their heads

Real estate agents are independent contractors.  The sign agreements to work for a broker.  Some agents become brokers and work independent of anyone else.  Most agents prefer to “hang their license” with a broker.  The industry has been that way for years.  The agent agrees to share a portion of their commission with the broker and the broker agrees to supply the agent with support, etc.  There was a time, when all agents began with a 50-50 split with the broker.  As the agent sold more, the broker agreed to increase the amount of money the agent received by reconfiguring the split.  Agents began seeking higher splits.  Successful agents would shop their talents to competing brokers and many were successful in garnering a larger share of the commission.  This system led to the fact that most traditional firms needed new blood to make a profit.  Agents were put under contract if they passed the state exam and had a pulse. Most of them failed within the first two years but the broker kept a large portion of the commission on sales that were made. (It is no secret that many agents got a license just to buy or sell their own home).

Then firms like ReMax came along with a different plan

The traditional brokerages were faced with a new dilemma.  Firms, like ReMax, came along and offered franchises to brokers that wanted to run a different business.  The agents in this system would pay a monthly fee to the broker and the agents would keep all the commission earned.  This plan was later altered to allow the agents to keep 95% of all the money they earned.  The agents could work from home.  If they wanted to have office space, they would pay rent.  The agent was responsible for all their expenses.  This seemed like a great idea to many agents.  They could control their expenses and keep almost all of their commission dollars. The brokers could budget based on the number of agents they had working for them.  It seemed like a perfect plan.

Then bundled this and bundled that unraveled

The absolute collapse of the economy came on the heels of  Wall Street  scheming.  The mortgage industry began to fold.  The government had to step in and bail out almost every major financial institution.  Housing sales began to slow down.  Requirements for a mortgage began to tighten.  Fewer people could qualify.  Prices that had skyrocketed everywhere in the country began to recede.  A few years passed and interest rates on adjustable mortgages began to reset.  Home owners began to fall behind.  Home owners that had taken equity out of homes during the good times began to see the values drop and found themselves “upside down”.  Borrowers that took out risky adjustable rate loans could not pay the new payment and discovered the home was worth less than what they owed.  The market fell apart.

The facts indicate, what has occurred is only the tip of the iceberg

Home values have plummeted about 30% in many areas.  They may continue to fall.  The “shadow” inventory of bank owned property that is not on the market continues to grow.  The basic laws regarding supply and demand will probably force home prices lower before they begin to rise.  In average times, home values could be expected to increase about 3% per year.  Simply put, if you begin on January 1, 2011, it will take about 10 years for your home to reach the value it had before the collapse.  TEN YEARS.

This is not like any real estate market that has ever existed.  There are some comparisons to the time period after the Great Depression, but this is a market members of the industry today have never experienced.  It is not a market like when interest rates hit 14%.  It is not a market like the early 90’s. This is a market that is a mystery to everyone.

Some brokers will survive.  Some agents will survive.  The costs of staying in business will have to be shared.  Agents will have to accept that if they want to keep more than about 75% of their sales generated commission, the will have to get a broker’s license and operate on their own.  Broker’s will have to accept that they will need to offer basic services to all the agents under them in return for about 20% of sales generated commissions.  Agents have forever borne the risk of succeeding.  Brokers will have to become more judicial in their decisions of whom to bring on board.  The more prestigious the broker, the better the agents, the more successful they will become. Branding competence instead of yellow signs or balloons or pictures of antiquated founders will increase credibility with a skeptical public.

This logo should mean more than the correct spelling of Realtor

The larger players are going to win. It has happened in every other industry. The challenge will be whether the new face of real estate is based on actually performing according to the Code of Ethics or will real estate go down the road of Wal-mart and other national chains that have gobbled up the retail industry.  Brokers and agents today have the opportunity to shape tomorrow.  If they sit and continue doing business as usual, they will discover that they may have been replaced by the bank teller or some version of on-line agency.

If tomorrow never comes, we can keep going down the same road.  But tomorrow always comes.

Do you hear what I hear?

Reaction to the economy

So, you sit there and listen to the talking heads proclaim the economy is beginning to show signs of life.  The NAR continues to trumpet that home prices are down and interest rates are at historical lows.  Oh, and the future looks bleak because interest rates will probably go up, so now is the time to buy.

Pent up demand will create an onslaught of buyers

Well, that’s what the brokers are saying.  They use logic to point out that people are still getting married, having babies, getting divorced, transferring from out of town, etc.  All the reasons people have bought in the past exist today and there must be more people on the fence because the market has been abysmal for several years.


A fairy tale that rings quite true when the experts speak

It is frustrating to many of us.  I have friends that are agents in Florida, Arizona, Pennsylvania, Virginia, New Jersey and several other states.  They don’t seem to be singing the same song.  Things are not good.  Things are not getting better.  The things we see on the inside indicate, they may never get back to anything close to a normal market. You see, we actually deal with the sellers and buyers.

Sellers are devastated. It doesn’t matter if they bought the home two years ago or twenty years ago. They have lost equity. It may be real ( if the equity was cashed out ) or it may be perceived ( if they were thinking that they could sell and supplement their retirement ).  The can not sell the house for what they want to sell it for.  In many cases, they can not sell it for what they own on it.  Home prices have plummeted all over the country.  In some areas they have rebounded a bit, but in most areas it will take ten years for prices to recover.They are devastated.

Buyers are terrified. It doesn’t matter if this is their first purchase or if they are moving up or if they are just investing.  How in the world can you buy a home if you are not sure it will hold it’s value. How in the world can you buy a home if there is a chance that the bank failed to foreclose properly and you might lose the home you bought. The fact that you will be made whole has little effect on the fear of needing to find a new home again.  Oh, and how do you buy a home if your job is in jeopardy or if you lost your job.  It really doesn’t make a bit of difference where interest rates are.

0% or 5% or 10% or more doesn’t matter if you don’t have a reliable income!

The economy is rotten.  Black Friday sales are not an indicator of our true economy.  Hell, most government reports exclude the cost of living from the cost of living indexes.  Politicians appoint bureaucrats that hire people to create information.  It is always tainted.  Most of the information, as bleak as it seems, is offered in the best light.

If you happen to be at a holiday party, and find yourself chatting with a real estate agent, don’t ask…and he won’t tell.  The market is the market. It is no better than any other segment of the economy.  Sure, if you have a friend or relative that is looking and is in position to buy, refer them.  If not, talk about the weather, sports or something else.

Truth be told, those of us surviving are becoming a smaller group everyday.  Those of us that wait for that next opportunity are very aware of the large volume of bank owned property waiting to put for sale.  We are very aware of the fact that the FHA is slowly eliminating condominiums from the mix.  We know that big banks do not give a whit for the FHA criteria and would rather use the 2011 version of redlining ( something now labeled – over lay ).

If you are watching and waiting, that is ok by me.  If you would like to be kept abreast of what is happening, subscribe to the blog or send me a note and I will add you to my email list for newsletters.  If you are packing up and moving to South America or beyond….be careful, it is a world economy.

On second thought, unless you work as a Realtor, I don’t think you ever hear what I hear.  And boys and girls, that is not really a bad thing.  We all should be listening to the sound of our own drum.

7 come 11 …. a roll of the dice, gambling on our weakness

Historically, people have rolled dice betting on the outcome.

I was educated in a parochial school (Saint John the Evangelist in Silver Spring, MD).  That was a long time ago but I still remember some of the lessons I learned at the feet of the good Sisters of the Immaculate Heart of Mary.  I also recall lessons learned daily at recess.  It was a simpler time when television was broadcast over 3 channels in black and white.  I had to pass Heitmueller’s farm each day as I walked to and from school.  The land that would be filled with Wheaton Plaza was still a forest.  The ICC had just been added to the future plans for Montgomery County.  This was almost ten years after WWII had ended and America was involved in the Cold War.

Casting lots

Back to the lesson’s learned.  In our religion class, our teacher covered all of the major events in Christianity.  In the Spring,  my dreams of Mickey Mantle were interrupted by the focus on Passion Week and Easter.  In one of the lessons, it was explained to us that while Christ hung on the cross,  the soldiers in charge of the crucifixion decided the new owner of Christ’s robe by casting lots (a roll of the dice).  Now, in those days, the Romans that carried out the crucifixion were not considered “the good guys”.  Their act of gambling to decide on the new owner of Christ’s last possession was used as an example of why gambling was bad. (I didn’t stop to consider that this flew in the face of the parish weekly bingos or the game of “hooligan” offered at the annual carnival.)  The numbers 7 and 11 were forever burned into my brain.

The attack on Pearl Harbor  1271941

I don’t remember exactly when, but at some point the date December 7, 1941 was burned into my brain.  There wasn’t much shared about the politics of the time.  It is sad to say that the Holocaust wasn’t focused on very much. My memories of the lessons are vague, but the feeling of being attacked by those horrible “Japs” was the emotion that lingered.  If you were to ask any elementary school child about the attack on Pearl Harbor, you would hear the tale of innocent sailors being murdered on quiet Sunday morning.  You would here about “kamikaze” pilots and the ritual of “Hari kari”.  We did learn that the attack had a religious fervor to it. The response, from Roosevelt’s speech to the bombs dropped on Hiroshima and Nagasaki were the main focus of history lessons.  The message was clear.  We were attacked and we responded.  The nation, regardless of political affiliation, came together as one force.

The attack on New York  9112001

Sixty years and a couple of months later,  America was attacked again.  As confusing as world politics are today,  I think I have a good idea why we were targeted.  Oh, there have been claims that we brought the attack on ourselves because of our lifestyle. Some have suggested our involvement in the middle East is to blame.  The turmoil over what may have caused the attack has come later.  I remember best the response, from Bush’s speech to flags waving across the nation.  I remember the anger.  I remember the silence echoing gently from plane-less blue sky’s. Of course, then I remember the “religious” cloak the cowards attempt to use to obfuscate their questionable justification for murder.

Two days, one a seven and one an eleven.

Despots, zealots, terrorists and self-proclaimed mis-guided “saviors” are forever taking chances on destroying our country and changing our way of life.  We are far from a perfect union.  Individually and nationally we do make mistakes.  Those that are intent on our destruction will seize on any apparent error and attempt to paint us in a corner of “evil doers” while they hide in caves or behind closed doors espousing “self righteous’ indignation.  Their constant threat is the price we pay for the right to live as we do.  Their totalitarian myopic view can not tolerate our steadfast support of the ideals in which our nation was founded.  The freedoms we have as stated in the Bill of Rights are an anathema to our enemies.  We visibly agree to disagree on many issues.  Our congress of elected representatives may feature a majority from the right or the left, but they always represent us.

Snake eyes…also know as craps…you lose

I suppose that the future will continue to give birth to those that wish to destroy us.  We may collectively grumble about intrusive searches while boarding planes.  We may challenge the wisdom of our military actions.  We may decry the direction taken by our leaders.  And yes, while we grumble they will continue to gamble.  They will continue to perceive our discourse as weakness without understanding it is the basis of our strength.  The future will hold times when they will “roll the dice” again and again.  I have complete faith that they will continue to watch those proverbial dice tumble to a stop, snake eyes, at the end of each roll.  They will leave the table broke and broken.

After all, this is the United States of America.  This is a country where a boy can learn the hard lessons of losing cherished “flip cards”, wander through life and become a rather thoughtful grown man.  Sure, we have always had dice games and people have always gambled.  When all is said and done, those that gamble lose and any person, group or nation that thinks they are gambling on our weakness will learn they are challenging our greatest strength.  And that my friends is a losing bet, every time it has been made.

Thank you to all those that have served and allowed me the freedom to speak.

Rent to Own? Before you ask …

I get a lot of emails and phone calls from folks that want to know if I can find them a home to rent with an option to purchase.  They have been on the internet, surfing, dreaming and hoping against hope that they can find a home to rent that will also be available for purchase at the end of their lease.

Now, some of them may have tried to purchase a home and found that they did not have the resources.  Maybe they discovered that lenders have a higher bar than the FHA requires.  It can be quite confusing out there for your average consumer.  The FHA says they will guarantee loans for people with a credit score as low as 580, but the lenders say they will not lend money to anyone with a score lower than 620.  I do this for a living and don’t understand how lenders get away with this, but they do.  It is the 21st century’s form of “redlining”.  The folks that are turned away begin seeking other alternatives.

In there search, the come across ads that offer them the opportunity to rent/lease a home and eventually be able to purchase the home.  There are firms that advertise “rent to own” homes using phrases that appeal to those that have been denied a mortgage. They offer their services to buyers who want to:

  • Secure a home
  • Own a home with less than perfect credit
  • Live in it now
  • Want to explore all options in how, when and what type of financing.

It sounds too good to be true.  In my opinion, it is just that, too good to be true.  Rent to own purchases have all the upside and downside of borrowing money from a loan shark. Yes, you may get into a home, but when the terms are realized, you may not be in line for the experience you expected.  If you step back and analyze the potential outcomes, you may rethink your decision.  Most consumers just don’t know or understand.

Rent to Own?  Before you ask, consider these factors.  The owner surely wants to sell.  The owner has not found a buyer willing to pay what the owner wants to receive for the home.  The owner will probably have a price in mind that is a bit higher than market value.  The potential rent to own buyer will most likely accept a higher price because it is the only way they feel they can own a home. A deal will be negotiated that allows for the sales price and the earnest money that will be accumulated in addition to the monthly rent.  By the way, the base monthly rent will probably be higher as well.  The rent to own buyer will accept this fact because, after all, it is a home they are going to own.

The amount of money needed each month will begin to add up.  Let’s just say the home is listed for sale at a price of $300,000.  Homes similar in age, condition and location are selling for $280,000.  The seller points out that as time goes by, the value of the home will increase.  The seller also points out that the sale will be consummated next year and the value of home will probably be greater then. The poor consumer can not buy one of the $280,000 homes, so they accept the sales price.  The seller explains that the rent is only $700 per month higher than comparable rentals, but remember, you aren’t buying one of those and $500 of the rent is going into an escrow account that is your earnest money deposit.  The $6,000 that accumulates over the year will be applied to your down payment or closing costs.

Stop and think.  Do you think the fine print is going to protect you?  What do you think will happen, if at the end of the year the value of the home has plummeted even more?  What do you think will happen if your circumstances change and you can not proceed?  What sort of interest rate do you think you will be charged?  Oh, and what do you think will happen to your $6,000 if you do not actually buy the home?

The ads that indicate you own the home a little bit of the time as you rent are not true.  You do not own one brick until the title is transferred into your name.  Sure, on an emotional level it all sounds to good to be true.  In reality, it is too good to be true.  Anyone that suggests that renting to own will solve any of the following is a buffoon.

  • Your needing time to arrange a shortage of a down payment
  • Your needing time to solve credit issues that are temporarily preventing you from owning a home
  • Your desire to “try-out” the house, schools or neighborhood first without a 30 year commitment.

If you can not qualify to buy now… rent.  Save your money for a down payment.  You should control your options and one of them should never be “option to buy”.  Do not let their tail wag your dog.  Home ownership can be accomplished.  There is no fast track. There are no short cuts.  The past five years should have revealed the fact that those that can not afford will lose what they attempt to buy.  Don’t become yet another casualty left by the side of the road by those that continue to take advantage of the uninformed and under educated consumer.

Rent to own?  Before you ask, make sure you are asking someone that will tell you the truth.

We are John MacArthur and Lourdes Tudela-MacArthur.  We are Realtors working with Frankly Real Estate.   We can be reached at 301-509-5111. You are welcome to visit our website Hot DC Homes