Solano Real Estate Scene: The luck factor
The largest purchase of one’s life is a home. One thing I have been thinking about lately is how the mortgage is actually a person’s largest purchase if you consider most of the buyers in Solano County use their VA eligibility to purchase with zero down or 3.5 percent to 25 percent down on FHA and conventional loans.
There are a fair share of cash buyers these days in Solano County but most of these buyers are out-of-towners from Silicon Valley or San Francisco, hedge funds from around the country and as far as even China. We have some local well-established and wealthy cash buyers that have enough dough saved up in stocks and real estate equity to pay cash, but more than 75 percent of our buyers need a mortgage.
My point about the mortgage being your largest purchase is that when you a buy a house with 10 percent down, you are acquiring a 10 percent stake in the property and the lender is in 90 percent. This puts the lender at more risk than the buyer and is why mortgage companies are careful about the investment.
The bizarre Wall Street behavior that took place from 2003-07 that allowed folks to purchase a million-dollar house with nothing down and no provable income is over. This behavior artificially inflated values by as much as 100 percent over those four years in blue-collar areas like Solano County and we experienced more foreclosures from 2008-14 than the county had experienced in the previous 60 years combined.
When purchasing a home these days, the internet has become a dominant way to view houses all over the country. You can watch a 3-D video of a condo on the 50th floor in Manhattan and check out the view from the claw-footed bathtub in the master bedroom.
When we look on the internet, the brainiac computer nerds have figured out all kinds of ways to capture your attention and your contact information. These giant companies like Facebook and Google, along with dozens of other players like Zillow, have artificial intelligence programs that can even follow you via the internet. I am 100 percent sure that someone in India knows I like Special K and Cocoa Krispies.
When purchasing a mortgage and a home, there is a “luck factor” if you do business with a mortgage company or real estate company that is not local. As I always say when training my team and my clients, “It’s all about the math.” If you count on someone from Texas, Detroit, India, Los Angeles or the worldwide web to help you buy a house, the odds are less favorable that you will luck out and get a well-qualified loan officer or Realtor to do your transaction.
Using someone local referred to you by your Uncle Joe or a trusted friend that can be held accountable right here in our community increases your odds of a smoother transaction, instead of some call center out of New York. These outsiders are selling your contact info to lenders and real estate companies and then gaining revenue through expensive advertising and referral fees.
If you are lucky and savvy, you may have a great experience dealing with someone that has little to lose personally for your success and happiness. However, the odds are in your favor if you deal with someone local whose kids and grandkids go to the same schools as yours.
I don’t know the exact number but I believe that Zillow, for example, is being paid millions of local dollars per year for advertising real estate in Solano County. This money is leaving our community and even local charities suffer when local business is lost.
I believe you should deal with a great local real estate broker and a great local lender that has great technology rather than do business with a great technology company that sells real estate and mortgages.
