What If Your Appraisal Price Doesn’t Match the Contract Price?

You have a couple of options when your sales price differs from your appraised value.

What happens when there’s a difference between your home’s sale price and the appraisal value? This

conundrum comes up a lot when there are big increases in property values over a short period.

Well, we have a couple of ways to address the issue:

    1. The agent can submit a rebuttal. Your agent can compile a list of comparable sales and send it

        to the appraisal company to show them why the appraised value was formed in error. Appraisers
        aren’t perfect, and increased business can add pressure to their jobs, causing them to make
        mistakes. However, most rebuttals aren’t accepted, except in the cases of short sales.

    2. Try to negotiate. If the rebuttal isn’t successful, it’s time to try negotiating. Most of the time, buyers

       in our market have to come up with the difference between the appraised value and the sales price,

        so a good negotiation tactic is to cut that difference in half—especially in the case of FHA loans.

        The reason that sellers must yield half of the difference is that the appraised value will stay on the

        record for 120 days. If you don’t sell to the FHA buyer, you’ll be locked into that appraised value for four

        months.

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This conundrum comes up a lot when there 

are big increases in property values 

over a short period.

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If you’d like more details on how to navigate this issue, don’t hesitate to reach out to me. I love to

respond to your questions. Hope to hear from you soon!

How Do SBA Loans Make Commercial Property Cheaper?

Here’s what you should know about the SBA loans in the new stimulus bill.

You all know by now that I’ve been following the financial world for the last few years. Today I have a piece of information that I’m excited to share with you, and I hope you share it with your friends and family. 

With the new COVID-19 stimulus package, SBA loans are here. Traditionally, it carried a 2.3% rate on a guaranteed fee, but that has now been cut in half to 1.5%. The origination fee has been eliminated as well. When you close a loan, SBA will also pay your first three months of your mortgage.

Why is this so exciting? Buying property for yourself or your business will end up costing less than renting if you take advantage of these rates. With the SBA loan at 2.5% over 25 years and 3.5% fixed for 25 years, the two-blend rate is roughly 3%, for conversation's sake.

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   The payment on these loans is fixed for 25 years.   

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Here’s a real example of the savings you could see on an industrial building: Let’s say you found something for $210 per square foot and finance $189 per square foot of the purchase after putting 10% down. After a 25-year amortization period at 3%, the cost ends up being 90 cents per square foot. That’s pretty much the rent you’d be paying right now for this kind of building.

Now an example of a commercial property: Let’s say it’s $400 per square foot and you finance 90% ($360 per square foot) after a 10% down payment. That will be a payment of $1.71 per square foot, which is considerably lower than the $2-per-square-foot average for rent. The payment is fixed for 25 years and the rate will stay the same.

Finally, let’s compare apples to apples by talking about the net lease, which covers the insurance on the building. On top of that, I always talk about appreciation in California, which is roughly 6% per year. Let’s say your industrial building goes from $210 to $250 per square foot, a 15% increase. The magnified return from your down payment on this is 1500%.

If you have any questions for me about this topic or other real estate questions, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.

Still Not Convinced Real Estate Is Better Than Stocks?

Real estate offers more leverage than stocks; 2020 is the proof.

If you’ve done business with me or have been a follower of my blog, you know that I’ve always said real estate gives you leverage. In 2020, the real estate market has outperformed the stock market—one slice of “normal” we can be thankful for. If you don’t think that’s normal, consider this: As I’ve pointed out in past videos, the stock market didn’t effectively change in the period between 2000 and 2009; if you had put $10,000 into the stock market in 2000, you would have ended up with $10,000 in 2009. Meanwhile, during that same period, real estate would have given you a massive double-digit return.

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       A home is an asset you can enjoy in real time while it appreciates significantly.

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This year alone, the Los Angeles County real estate market has increased by 17%; the San Bernardino market increased by 19%; the Riverside market increased by 16%; and the Orange County market increased by 12.5%. What does that mean for you? Well, if at the start of the year you had financed your purchase of a $600,000 house with an FHA loan, then you would have been required to put down 3.5%, or $20,000 in this case. By year’s end, the value of that $600,000 home could have easily increased by 15%, which would be $90,000. If you put in $20,000 but gained $90,000 in equity in just a year, you’ve seen a return on your investment and then some! That’s leverage. 

At 3:18 in the video above, I’ve included some graphs comparing data from the S&P 500 and the Dow Jones Industrial Average to our surrounding area real estate markets so you can see why real estate is better than stocks when it comes to building wealth. A home is an asset you can enjoy in real time while it appreciates significantly; stocks are intangible, and they can’t offer you peace of mind on a day-to-day basis (not to mention all the tax advantages that accompany homeownership). Even though 2020 has been a stressful year for many Americans, it’s been a phenomenal one for homeowners or those who are looking to purchase a home soon. 

If you have questions about building wealth through real estate or have any buying or selling needs for the year ahead, don’t hesitate to reach out to me. I’d love to hear from you, and I’m always happy to help!