Episode #14

Biggest Misconception About the Home Buying Industry  

What's up everybody? Welcome to the Fitness Realty channel! My name is TJ Mclelland, and I'm the broker. I'm super excited to share all the things we have planned with you. So sit back, strap in and let's have some fun!  

What's up everybody? Hey, TJ Mclelland, broker, Fitness Realty, back with another exciting episode. I want to give myself a little bit of a sorry, or I just want to show you guys something that's crazy. If you take a look at my eye, I caught a right hook from a very talented fighter sparring in karate last night, so things were kind of crazy due to super talent. So I just want to say a shout-out to him. We had a good time sparring, and it got a little crazy. 

So anyway, that's why it looks like I'm wearing makeup. Anyway, this episode is going to be kind of a unique episode. We're going to be kind of discussing what the biggest misconception is about our industry. And the biggest misconception, in my opinion, currently is that people say they can't afford a home on both sides of the fence. I've had buyers that have said I can't afford a home. There's no way I can purchase in this market. 

This is one of the toughest, one of the most difficult markets to get into. But that feeling of you can't buy a home. A typically has no back end to it and typically doesn't even have any data behind it. Most of the time, people are just saying that because they think that the market is super hard, it's super competitive, they think they don't make enough money, or they just have no clue about what it is or what it looks like to purchase a home. 

The other side of that coin is sellers also saying that they can't afford or can't buy another house, or can't afford to upgrade, or they just can't stay, or they can't go anywhere because they are stuck in their current house. So on both sides, you can see buyers saying they can't afford a house because they just, can't buy anything. And then you have sellers saying, well, there's nowhere I can go to buy because we're stuck in this house. 

So I really wanted to bring some enlightenment to that argument and really kind of show you that it and really show you that you can afford to buy a home in either situation. That's not always the case. Of course, there are a lot of times where a buyer isn't qualified, so I'm not saying that. I'm saying that there is room for opportunity, and I want to kind of highlight that. 

So let's stick with buyers for a second. Typically when I hear a buyer say there's no way I can afford a home, it is because they've heard or read on the Internet, or they've had family or friends really reach out to them and say, hey, there's no way you can buy a house in this market. You couldn't even afford a payment of XYZ. 

There's nothing that you could even buy that would be comparable to what you're living in now. Or there's a feeling of them being pushed down from everyone else and justice saying, hey, we want to keep you down. There's no way that we're going to allow you to kind of step outside of your comfort zone and grow. So what I want to say to that is there is so much opportunity for you to buy something and get your foot in the door. 

Typically with my buyers, they feel like they should have bought two years ago or they should have bought last year. I've heard that so many times. It's just kind of crazy, which is true. It is very true. Hey, you should have bought two years ago. You should have bought four years ago. Whatever the case is, we should have, could have, would have. And those principles are always going to be with us. But if you're looking at the second best time to purchase a home, it's right now. 

So if you couldn't do it 20 years ago or two years ago, the second best time is now. Even though people are talking about interest rate hikes and the market exploding, and we're in a bubble and everything like that. Time in the market has proven to be beneficial over trying to time the market and waiting for that downturn which may never come. Who knows what's going to happen? We don't have a crystal ball. 

So what I like there is there is opportunity for you to purchase a home and get your foot in the door. Like I said, the freight train did take off. It is moving at light speed right now. It is just really going fast, and it is moving very, very quickly in the velocity of those price appreciations, interest rates, and everything that goes into that into factoring into purchasing a home.

So the faster we can get you into a home, you can actually step onto the train that is moving away really, really quickly so that you can have both a price appreciation, a steady mortgage payment so that it's not fluctuating, unlike rent is. So I don't currently have some rent stats of how quickly it has gone up the past year. I do run some stats so I could get those, but I don't want to peg it to any particular percentage rate.

You do have a lot of renters, though with landlords that are increasing the rent that they are assessing to that person. And so with the rent hikes and the rent increases, let's say it's 20%, if you're paying $2000 for rent right now, a 20% increase is going to take you to $2400. That is huge. I'm going to use a personal experience from one of our clients just recently that we helped close. They got a notice from their landlord that their rent was gonna go up over. I think it was $1900.

Don't quote me on that part. I don't want to put too many specific figures out there, but it was going to be an increase. The increase was over $200 for their lease per month, and so that increase was going to put them into a position where they were like, why are we flushing away all of this money to the landlord when we could be owning something?

Well, luckily, they stepped into an open house with me. Yours truly, of course, and where I could coach them and guide them and help them through the process of understanding what it looks like to buy a home. A lot of times, people are really scared because they're just not educated about what it looks like.

They don't know what the numbers look like. They don't know what the payments look like. They're really nervous about talking to anybody about big financial purchases because they feel like they're going to get scammed. They also feel like there isn't really any education out there, so they can't learn it and things like that.

So they're really nervous. And they're really fearful. And what I like to bring is the education piece to that side so that I can show them what it looks like. These particular individuals walked into the open house. I met them. I greeted them. We had a good time. They looked at the house. They loved the home. And then they started saying, well, what does it look like to buy? We've never purchased a home before. We've never even talked about it. Nobody really talks about it. We just don't know what to do.

And I said you're in the best hands possible. I will take really good care of you. I wanna make sure that you feel educated and comfortable the entire time. So I started to show them exactly what it looks like to purchase a home. We got them in front of Michelle Reed so that they could go over their numbers and look at what their payment would look like.

We got them fully qualified with a pre-approval letter so that they knew they could afford the home and they knew they could afford the payment and then we started the contract process and got them under contract with that home, and they were super excited that it was actually happening because this is a very, very tough market and very, very competitive. So they were just excited to get something under contract and know that potentially they would be buying this home.

So the thing I wanna line out right there is that most of the time with buyers, since they don't understand what the payment looks like, they just don't know. So what I try to do is put them in front of the lender who will run their credit, look at what their income looks like, look at what their debt looks like, a whole lot of factors that lenders do to go into looking at. But you can afford a payment and what it looks like and what loan program they're going to go into.

But I try to get them in front of that lender because without the education. You're just thinking about what ifs and hypotheticals, which it just doesn't work in this real estate market. So getting you in front of the lender is one for new buyers for you to understand what the payments look like. Step one is legitimately getting you in front of a lender.

On that note, these particular buyers for this particular home, once we ran their numbers and they were seeing what their payment was going to be, it was actually less than what their rent was going up to, and this was a very similar living arrangement comparatively to what they were already renting.

So now, instead of paying off a landlord's mortgage, they were going to pay off their own mortgage, which was really, really powerful and super exciting for them. So anyway, Long story short, we did close that deal, they were super excited, and got into the home. They are now homeowners, which is very, very awesome.

So that kind of goes to show you what the buyer side looks like. I want to get you in front of a lender. I want you to see what your numbers look like. If your numbers don't work and you just aren't qualified, there are steps we can take for you to get qualified so that you can eventually purchase a home.

So there is a pathway there we can help you, but the only way we can is if you reach out, get in contact with us so we can make sure that you understand. The education side of buying a home and the education side of what all your numbers look like. Let's switch gears really quick to the seller side.

On the seller side, it's a little bit different because sometimes, when I hear, oh, I can't afford a home. You've bought a home before, so you understand what it looks like to afford to buy a home. But maybe the new media or not new, but maybe the media has coached you into thinking that you just can't afford anything at this point because of inflation supply, right? It's all just going down in a handbasket.

And so I really want to point out on the solar side, there are opportunities for you as well. Those opportunities look like a couple of things. One, eventually, we're going to have a discussion about the velocity of money so that you can actually learn how to use your primary residence and leverage that into two additional properties and become a rental or have rental properties of your own, which is very powerful.

However, if you're not willing to go down that road risk, risk tolerance, or anything like that, there is a way for you to step into upgrading from the current home you living into the next home and still be able to afford that utilizing all of the equity that is in your current home. It is hard for me to say each specific kind of instance that would get you to be able to afford that next house.

So without diving into each detail, what I want to say is there is an opportunity for you. What I want to do is get you in front of a lender so that we can see what you can afford, and I will bring the piece of how much your home is currently worth against how much you owe on it. That equity piece is the piece that the lender will need so that we can actually say alright, you're going to qualify for the upgrade of 30 or 40% from where you're at currently.

So, in a nutshell, buyers and sellers, the way forward is to get in contact with us and get in front of a lender so that you can run your numbers and you can learn and get educated about what the opportunities look like that are in front of you.

So that is the biggest misconception of our industry currently, that you just can't afford a home, there's nothing to buy, you can't afford anything. And what I want to say to that is. There are opportunities. I just want to get you in front of the right people and get you educated so that you can see or so that you can actually get your foot on the freight train that's moving very, very quickly. OK. Well, that's been all about misconceptions in our industry. I love you guys, and thanks, and we'll see you next time. Bye!

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