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Hard Money Loans – When a Real Estate Investment Needs Fast Financing » RealtyBizNews: Real Estate News

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There are many ways to successfully invest in real estate. Hard money lending isn’t that much noticed these days, but it still has a valuable place in the investment world. Coin lenders generally do not value real estate in the same way that most investors and other real estate professionals do. Hard cash loans can be easier to come by, but they can be expensive. Despite the cost, they are an indispensable tool for investors. Knowing when to use hard money and how to get it is crucial.

As an investor, you should know your local market inside out. After a quick tour, you should instinctively have a good idea of ​​property value. What is different for coin lenders is that they often lend money outside of their local market. It can be in a distant city or across the country. Coin lenders cannot physically view the property themselves, nor do they have a solid understanding of local property values.

Every private contract is written for the mutual benefit of both the investor and the lender, but there are general rules that drive the hard money market. Hard money lenders do not use the standard underwriting process that banks use. Banks focus on the borrower’s credit history and income. A bank loan is usually 90% or more of the home value.

Coin lenders focus on the value of the property rather than the borrower’s creditworthiness. While they will look for a professional assessment, it is not the only assessment tool they rely on. Often times, they want at least two and possibly three assessment models to help them make an informed decision. Coin lenders will look through tax bills, but again this is not a reliable method of valuing property. Tax assessment districts calculate values ​​annually at best and many only every two years. In addition, the tax office only evaluates real estate from the curb. You do not have access to the inside of the house.

Broker’s Price Opinion (BPO) is another tool that moneylenders use to value real estate. A BPO is an estate agent’s appraisal of the property’s value. However, hard money providers are also skeptical of these valuations, as brokers tend to overvaluate real estate in the hope of a higher listing commission and an optimistic view of the local real estate market.

The value a hard money lender attaches to a property has nothing to do with the purchase price you negotiated. It is based on the market value of the property.

In the end, tough money lenders take all of the information available to make an informed decision. You ask yourself questions like: “When the market has bottomed out, can I get the money I borrowed for the property back? Will I still benefit from this feature if I have to take control in the event of a payment default? “

To fully protect themselves, hard money lenders typically only loan out 50 to 70% of the property’s value. As an investor, you must either negotiate a purchase price of this magnitude or have additional financing available. Also, remember that a tough moneylender knows the fix-and-flip business as much as any investor does. You want to know your exact plan for the property and need to approve it along with the value of the property.

Most hard money lenders provide short-term loans with an average duration of six months to two years. In general, the greatest benefit that hard money brings is getting it closed quickly. Since there is no credit check, the closing can take place a few days after an application has been approved. Once you’ve established a relationship with a hard money lender, loans can be funded in a matter of hours. A hard money investor needs to know what documents are required to approve the application.

If your ducks aren’t all in a row, funding can take a few weeks, but just three to five days are possible. If you have a trusting relationship with a hard money lender, you may have cash within 24 to 72 hours.

Hard money is not for everyone (or even most people). The only reason to get such a loan is for a large investment that requires a quick response. It can cost you 10% of the loan amount for interest and loan fees. But if you can make 30% on a deal in weeks or months, it’s probably worth paying more for quick funding. When a good investment doesn’t keep you waiting, a hard cash loan may still be the best answer.

What else do you think investors should know about hard money loans? Please share your findings and experiences by leaving a comment.

Additionally, our weekly Ask Brian column welcomes questions from readers of all levels of real estate experience. Please email your questions, inquiries or article ideas to askbrian@realtybiznews.com.

Photo by Frederick Warren on Unsplash

Author Biography: Brian Kline has been investing in real estate for more than 35 years and has been writing about real estate investing for 12 years. He also has over 30 years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives in Lake Cushman, Washington. A vacation destination near a national and Pacific ocean.

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Real Estate News

Real estate commission structures do need changing

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Earlier this month the editors of the Boston Herald called on the National Association of Realtors to amend a number of rules that they believe are anti-competitive and are designed to keep real estate commissions artificially high.

In response to the editorial, NAR President Charlie Oppler pointed out that commission rates have steadily declined in recent years. The consequence of this decline, according to Oppler, is that the commissions are fully negotiable, which suggests that agent compensation is not anti-competitive. However, a closer look at the commission data actually supports the opposite conclusion; namely, that there is substantial evidence that the current commission structure is against antitrust law.

When analyzing real estate commissions, it is important to recognize that the total real estate commission consists of two components: the broker’s commission and the buyer’s commission.

Because listing agents negotiate their commissions directly with sellers, there are no anti-competitive concerns with this component of total commission. However, this is not the case with the brokerage commission because the brokerage commissions do not negotiate their commissions directly with their buyers like they would in any other industry. Instead, the NAR rules stipulate that when listing the home, the seller must offer a preset, non-negotiable commission to the buyer’s agent who mediates the buyer.

This means that the buyer’s brokerage commission is not dictated by free market forces when the price of a service equals the value of the service. Instead, it is determined by how high the buyer’s commission is in the respective market. This notion of a common price exists because most sellers either from experience or from their brokerage agents know that offering a lower brokerage commission to the buyer would encourage brokers to illegally distract their customers from their offers and towards properties with higher commissions .

The declining commission data referenced by Oppler emphatically supports this characterization of real estate commissions. According to industry news site RealTrends, the average national commission rate has fallen from 5.40% in 2012 to 4.90% to 4.94% in 2020. (For simplicity we assume it is 4.90%.)

However, as explained above, we have to split the total commission into the broker’s commission and the buyer’s commission. According to a Redfin study, the average brokerage commission fell only slightly from 2.8% in 2012 to 2.7% in 2020. It can be deduced from this that the average brokerage commission fell from 2.6% to 2.2% during this period – four times the decrease in the buyer’s average brokerage commission.

It should come as no surprise that the average brokerage commission has dropped significantly over this period. First, the number of active brokers increased by 46% from nearly one million to nearly 1.5 million between 2012 and 2020. It is to be expected that this increasing competition will put pressure on commissions. Second, the average home sale price rose 23% (adjusted for inflation) over this eight year period, more than offsetting the decline in average listing commission. Finally, the increasing adoption of technological tools such as electronic signature software has helped streamline the process.

Therefore, the sharp drop in the average brokerage commission is an indication that free market forces are at play on the listing side. If this were the case on the buy side, we would expect a similar decline in the buyer’s average brokerage commission as the trends described above affect both sides of the deal. On the buy side, the decline is even more dramatic as buyers increasingly find their new homes on real estate websites like Zillow and realtor.com.

The fact that the buyer’s average brokerage fee has changed little since 2012 therefore supports the argument that the buyer’s brokerage fee is dictated by an arbitrary rate rather than free market forces.

Will Fried is a data scientist at REX.

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Fall Real Estate: Tri-Valley market shifting as 2021 comes to an end | News

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Tired homebuyers looking for a break can look forward to something in Pleasanton in 2022.

Buyer behavior changed in the second half of 2021 and is likely to continue into next year, said Tina Hand, 2021 president of the Bay East Association of Realtors.

“In general, homebuyers find less competition when they bid on real estate,” said Hand. “Many buyers are still a bit tired; they have been on the market for a long time and have been much outbid.”

She explained that historically high sales prices have taken their toll and there are simply fewer buyers in the market. Hand said buyers “are still waiting for prices to fall further despite we’ve seen price adjustments.”

The number of pending sales in Pleasanton peaked at 87 in April and then stabilized in May, June and July. Pending sales fell to 57 in August and then to 54 in September. This trend suggests a decline in buyer enthusiasm, which is also reflected in sales prices.

From August through September, the average retail price for a single family home in Pleasanton fell from $ 1.79 million to $ 1.56 million. This change was just one of the few times in 2021 that sales prices dropped month on month.

Hand said buyers are pulling out and sellers are not used to that. When asked how the sellers are reacting, Hand said: “I think they are a bit surprised that in August and early September they are not getting the prices we saw the market is shifting.”

“Sellers had received 15 or 20 multiple bids that were $ 200,000 to $ 400,000 above the asking price, and that doesn’t happen,” she said.

According to Hand, changes in the total cost of living are dampening buyer enthusiasm.

“People are starting to see fuel prices go up, food prices go up. I think that’s another factor in why people might be backing off a bit,” she added. “We have inflation going on and I think that scares people. First-time buyers in particular are a little nervous and will wait and see what happens.

The monthly price changes from August to September are surprising, but do not yet indicate a major shift in home sales prices. The average sale price for a home in Pleasanton in 2020 was just over $ 1.25 million. From January to August 2021, the average retail price was more than $ 1.6 million.

Hand said: “There is talk of a ‘housing bubble’ but the factors are just not there; this is not 2008. What happened then will not happen in 2021.”

Looking ahead, Hand said buyers should be positive with potentially more options. “More inventory in the market will help home buyers moving up or down or first-time home buyers – whatever the case.”

When asked when the 2022 real estate season will start, Hand predicted, “I bet it will start in late December or mid-January. that will make a difference in both residential and commercial real estate. “

Editor’s Note: David Stark is the public affairs and communications director for the Bay East Association of Realtors, based in Pleasanton.

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Real Estate News

Shaq Sells Florida Mansion For 60% Less Than He Originally Sought

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After three years, five agents, and several price cuts, the NBA legend is Shaquille O’Neal has finally made a sale of its longstanding Florida property.

A deal for the huge estate known as Shaq-apulco was sealed for $ 11 million. That was 33% less than the last April list price of $ 16.5 million.

In 2018, Shaqs Spread hit the market in Windermere, FL for a whopping $ 28 million. Months later, the price was lowered to $ 22 million.

The waterfront retreat returned to the market in 2020 with a new marketing strategy and a new price of $ 19.5 million before being dropped again earlier this year.

Ultimately, the property was sold for 60 percent of the original, soaring asking price.

O’Neal realtor Benjamin Hillman of Premier Sotheby’s International Realty explained what made buyers decide and said through a representative, “It was the amenities and expansive lakeside setting that did it.”

He did not want to comment on the selling price.

The huge mansion, which the athlete bought for $ 3.95 million in 1993, has been modified down to the smallest detail. That turned out to be a certain hurdle for buyers.

New listing agent, new strategy

Hillman, the fifth agent to oversee the listing, spoke to us back in April about his revamped sales strategy. His goal: a lot less Shaq.

“I watched this house for over three years and they all walked down the same street, from Shaq, Shaq, Shaq,” Hillman told us about the strategy of previous agents. “But I want to take him out of the picture. I asked that any Shaq items that could be moved be moved. “

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This was a challenge given the “S” branding throughout the 31,000-square-foot interior, sports field, and oversized, custom-made furniture tailored to fit the 7-foot-1-inch star.

However, Hillman really managed to clear out a lot of Shaq’s belongings. In addition, the interior walls were painted white and many rooms were newly staged.

As the photos illustrate, references to Shaq remain: the diesel truck mural, the cinema decorated with Superman, and a similarly branded motor show. The “S” is even engraved in a glass shower door. The indoor basketball court still has Shaq’s name on the hardwood.

Trophy home

Unsurprisingly, Shaqs Spread has everything a superstar could need. The spacious interior offers breathtaking perks anchored by a 1,170 square foot two story great room with a marble fireplace and glass walls.

For entertainment, the manor house offers a cigar room, an aquarium room, a home theater, a games room, a dance studio, an office and a wine bar.

The master suite includes a 900 square meter sleeping area, two bathrooms and four closets.

Luxurious landscape

Despite its highly adapted furnishings, the property offers elements that every luxury buyer will appreciate. The 4 acre area overlooks Lake Butler and offers 700 feet of lakefront.

In addition, the royal residence is in the gated golf club community of Isleworth.

The resort-like facility is certainly a selling point. There is a 25m long and 4.5m deep pool with a custom rock waterfall. A summer kitchen, tiki-style cabana, and hot tub are also part of the package.

A covered boat dock with seating area is equipped with an electric boat lift.

O’Neal, 49, has long since left this huge mansion.

After a 19-year career, he retired from the NBA in 2011. He spends more time in Atlanta, where he works as an analyst for Inside the NBA on TNT.

Benjamin Hillman with Premier Sotheby’s International Realty represented O’Neal. Rob Rahter, a broker partner and specialist in luxury real estate for the Stockworth Realty Group, represented the buyer.

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