Six questions with a real estate veteran

Posted by Kansas RealEstateRama

November 15, 2007

As the country struggles through a sluggish housing market, a veteran of the real estate industry speaks out against practices that contributed to the market’s slowdown.

Helen Crow, a broker with Kirk & Cobb Realtors, has been selling real estate since she was 21 in 1973.

How’d we get in this mess?
We borrowed from our future.
For a long time, baby boomers controlled the market, especially in the 1980s and 1990s. But most were settled by 2000. To get the market churning again, real estate people, loan officers and banks decided the answer was make financing easier.

Half of the mortgages in 2005 and 2006 were exotic financing, such as variable interest rates. I almost never see a substantial down payment anymore. It’s not uncommon to see buyers barely come up with $500 in earnest money.

Are banks partly responsible?
In 1973, banks recommended a mortgage should be no more than 25 percent of gross monthly income, and all bills together should be no more than 32 percent of gross monthly income. Today, house payments represent 33 percent to 50 percent of gross monthly income.

What is wrong with today’s buyers?
The phrase “You can’t afford it” doesn’t exist any more. Most parents don’t say it.
Young couples say they want a house, but when we sit down and develop a budget and I show them how much it is going to cost, including maintenance, the budget doesn’t work. I’ve actually told people they can’t afford this house, and they tell me, “We found a Realtor who was more fun.”

Do Realtors get involved with financing?
Realtors should get involved, but in this day and age, I see less and less of it. When I started in 1973, there were only seven or eight lenders in Topeka. Today we’ve seen as many as 300 in the course of a year.

What creates a good buyer?
Get your credit score up by borrowing money responsibly and making timely payments your highest priority.
If you are going to take on home ownership, make sure you have a $5,000 reserve. Make sure you have an affordable credit line. Because if that sewer goes out, you will have money to pay for it.
Budget in maintenance costs. On a $100,000 house, I want people to show they are banking or spending $300 per month for maintenance or future maintenance.
Consider a 15-year loan. It doesn’t take a double house payment to pay off a loan in half the time. It’s the world’s best-kept secret.

How does a real estate agent get through slow times?
They should educate themselves. It has been possible for a real estate salesman to make a good living in the last few years without bothering to develop much expertise in their field.
Now it will become much more important to educate themselves about the market, strategies, the economy, mortgage lending practices, contract issues.

by Michael Hooper: (785) 295-1293

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