Money Rehab with Nicole Lapin
How Real Estate is Reacting to the Election, Interest Rates, the NAR Lawsuit and Climate Change
Mon, 04 Nov 2024
Today, Nicole is joined once again by Jon Grauman (Real Estate Agent and Founder and Principal at Grauman Rosenfeld Group) to talk about all things real estate. From the election, to interest rates, the NAR lawsuit, and climate change, Jon and Nicole leave no stone unturned so you can plan the next steps for you and your future (or current!) home.
Chapter 1: How do elections impact the real estate market?
Customarily, historically, the commission has always been paid for in the past by the seller.
And so this couldn't be passed on to the home buyers now.
It could, sure. It absolutely could. So let's say that you have a homeowner, we'll call him Joe Schmo, and he's selling his house at 123 Main Street for a million dollars. And he says, you know what? I read this article the other day in, you know,
I was listening to this amazing podcast.
I was listening to this amazing podcast, and my takeaway was I don't have to pay commissions anymore, which, by the way, is the way a lot of people are hearing and reading this. Okay, so, Mr. Seller, that's true. You're not required to pay the commission. However... Let's look at what other listings are available in your market right now and whether or not they're offering a commission.
Because what you don't want to do is put yourself at a competitive disadvantage relative to what else is on the market. Now, if you don't want to pay the commission, that's okay. Again, that's your prerogative. But commissions have always been baked into the purchase price. So if you're not willing to pay, let's say, 2.5%, which would be $25,000 on that million-dollar sale...
then the offer may come in at 975 because the buyer now has to pay that fee directly to their broker. So if you're not covering it, they're going to. In other words, you pull one lever, you pull one down, the other one goes up, it's all connected. You're paying for it somehow. this all works out fine as long as everyone's rowing in the same direction.
Meaning as long as everyone understands that basic principle that like it's being paid for one way or another, then it's fine. It's when a seller says, well, I'm not paying for it and I still want my million dollars for the house. It's like, boom. Look, Joe, Joe, come on, Joe. I mean, look, I get people want what they want. You know, my daughter wants a pony.
That doesn't mean she's going to get one. Like people just need to understand the basic sort of principles and concepts of how this has worked because there's a reason behind it. But, you know, this notion that like, well, the buyers have to pay commissions now. The buyers have always paid commissions.
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Chapter 2: What are the effects of interest rates on housing?
Buy, renovate, rent.
This is for people who are buying a bunch of investment properties and they're- I mean, that to me is somewhat self-evident.
Like buy a property where there's value add opportunities, renovate to add that value, which thus should increase your equity, and then refinance based on that equity because you'll have a lower LTV and hopefully a lower mortgage payment, or a lower interest rate and a lower mortgage payment, and then use that leverage to go buy more.
LTV, like loan to value.
Yeah, I mean, that's the sort of basics of real estate investment.
Choose a 40-year mortgage if you can get one. Truth or Trent?
I'm gonna say neither, but worth looking at.
So- Or a 15 year.
No, totally different. So, okay, so mortgages, this is just this might be a snooze fest for some people, but, and I only know all this by the way, because I was a mortgage broker for eight years. That's why I can speak this language fairly fluently, is that mortgages are amortized over a certain period of time. It's generally 30 years. That's why people know of a 30 year fixed.
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Chapter 4: What role does climate change play in real estate?
So a fancier timeshare.
Sure, yes, a fancier timeshare. Different versions of fractional ownership that allow more accessibility to people.
Okay, can I tell you something that's been on my mind a lot? I'm really concerned, John, about something that doesn't sound fun and sexy, but I think is gonna be a big problem, which is insurance. Home insurance during the climate crisis, especially in Florida and in California, I think they're skyrocketing. I think a lot of people can get insurance now and they're not factoring it in.
into the overall budget that they're going out to market with. I'm scared. You should be. Are you?
You should be legitimately scared. This is the greatest existential threat to real estate. It's not interest rates. It's not supply and demand. It's climate change. Climate change is the greatest threat to real estate, period, full stop, particularly in the coastal markets that are the luxury markets and the most expensive markets, of course.
I mean, obviously, you look at just the tragedies that happened in Florida this year, which happen every year, by the way. How long is it before one of those storms comes sweeping through Miami? Miami has been the biggest winner in the last three years of real estate in the United States. So much wealth has flocked down there.
What happens when, not if, when one of those storms comes through the center of Miami and demolishes that real estate? Like, it's...
Yeah, these once in a lifetime storms are happening every couple of years.
That's exactly right. That's exactly. They're no longer once in a lifetime. And that's just, again, unfortunately, sadly, that's the new world that we live in. But the ability to get insurance as it relates to that, which is a requirement of a loan if you're getting a mortgage, is going to be a major factor. And at some point, I have to imagine,
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