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Closing time 2/23/20 

How to avoid overpricing properties in a shifting market

According to the 2019 NAR profile of home buyers and sellers, 40 percent of sellers had to reduce their price at least once. If prices have already peaked in your market and have now started to decline, an even greater number of sellers will be reducing their listing prices in the very near future.

signs prices have peaked

In addition to an increase in inventory, what are the other tell-tale signs that your market has peaked?

• Multiple offers disappear
• Days on market increase
• Price reductions increase
• The number of expired listings increases
• Builders start offering incentives

A major challenge in declining markets? Comparable sales

If you’re seeing any of the early warning signs above, there’s another danger lurking ahead: If prices have begun to decline, the comparable sales you’re using to price the property may be too high.

Convincing sellers prices are decreasing

This may be one of the most difficult challenges in the business. One strategy that works extremely well with most sellers, including CPAs, attorneys and banks, is to select the appropriate comparable sales for the last six months and then calculate the average price per square foot for those properties that closed during that time period.

Overcoming ‘We can always wait!’

Even if you employ all of these approaches, some sellers will tell you, “We’ll wait until the market gets better.” To overcome this objection, show them the cost of waiting.

Prepare now

If your market has begun to slow down, mastering the declining market conversation is critical. Start preparing now so you’ll be ready if and when one of your high-end listings, or your whole market, slips into down market territory.

Keller Williams to end lifelong profit share program for defectors

A group of top Keller Williams earners, market center owners and regional leaders have gotten their way: As of April 1, 2020, KW associates that jump ship to a competitor will no longer be able to receive profit shares from the company’s lifelong revenue program.

The policy is not retroactive and will only apply to associates that join on or after April 1.

Keller Williams’ International Associate Leadership Council (IALC) made the change Feb. 15 at the franchiser's Family Reunion conference in Dallas, Texas. The council also increased the profit sharing vesting period, which is how long a KW associate has to be with the company before lifetime profit share benefits are unconditionally bestowed, to seven consecutive years, up from three consecutive years.

The policy changes are mandatory and must be implemented by April 1

The changes seem to be the result of efforts made by a group of top KW earners last year to change the profit share program to limit it to associates that remain with Keller Williams.

Keller Williams declined to comment on the rationale behind the changes and on whether they would affect agent recruiting. The company has 159,372 agents in the U.S. and Canada and a total of 169,317 agents worldwide, as of Dec. 31, 2019. The company has lost agents in four consecutive months.

7 facts about FHA loans you should know

 1. Homeowners don’t have to pay FHA mortgage insurance forever.

 FHA’s “life of the loan” policy on mortgage insurance is one of its most unpopular features. Many first-time buyers shy away from FHA when they learn that FHA requires them to keep their FHA mortgage insurance as long as they have an FHA mortgage.  

2. You can qualify for an FHA mortgage only two years after a bankruptcy and three years after a foreclosure.

In line with its mandate to provide mortgage credit to under-served populations, FHA is more lenient than many conventional lenders on giving qualified borrowers a second chance after foreclosures and bankruptcies. 

3. You can get an FHA mortgage with a much lower credit score than a conventional mortgage.

Borrowers with credit scores as low as 580 can qualify for FHA financing with 3.5 percent down. Scores between 500 and 580 can be eligible for mortgages with 10 percent down.

4. FHA loans usually have lower interest rates than conventional loans.

There’s no guarantee that FHA-approved lenders will give you a better rate on an FHA loan than a conventional one, but they usually do. 

5. FHA is not for everyone. Investment properties, second homes and higher-end homes don’t qualify.

FHA will not finance second homes, vacation homes, investment properties, or flips (a property purchased within 90 days of a prior sale.)  Properties must be primary residences where owners live for the majority of the year. The FHA requires that a buyer moves into the property within 60 days of closing.

6. FHA is kind to debt limits but tough on deferred student loan debt.

Lenders assess a borrower’s ability to handle a mortgage by the debt-to-income ratio.  The “front-end” ratio looks at housing-related debts only (monthly mortgage payments, property taxes, etc.). The “back-end” number takes all recurring monthly debts into account. This can include the mortgage payment, credit cards, car loans, etc. 

The current (2019) limits for FHA debt-to-income ratios are 31 percent for housing-related debt (mortgage, property taxes), and 43 percent for total debt or less. In December 2019 the actual average DTI for FHA purchase loans was 28 percent front-end and 44 percent back-end. For conventional purchase loans, the DTI average wasmuch lower, at 23 percent for housing expenses and 36 percent for all monthly debt payments .

7. If you have a good credit score, you will pay more for FHA mortgage insurance than private mortgage insurance. 

A study last year by...