Strategies for Real Estate Success With Fred Glick and René Pérez Jr. of Arrivva

Here’s a glimpse of what you’ll learn: 

• We discuss why list prices are not the ultimate guide for making offers in the real estate market
• Delve into the seller’s perspective and discover the importance of ultra-preparation and effective mortgage strategies to secure your dream home
• Understand the art of negotiation in real estate
• Explore the significance of fully underwritten pre-approvals in real estate transactions
• Uncover the impact of climate change on homeowners insurance costs and learn about the rising challenges and strategies to navigate this crisis effectively
• Fred and René discuss the evolving criteria for condo financing and the importance of HOA transparency, shedding light on challenges buyers might face
• Explore the concept of a 1031 reverse exchange
• Delve into the changing landscape of real estate commissions and how transparency is reshaping the industry
• We discuss market conditions, inventory challenges, and the impact of interest rates, especially in the California real estate market
• Understand the complex relationship between interest rates, homeownership, and long-term investments
• Learn about the importance of understanding comparable properties (comps) and appraisals in the competitive real estate market
• Highlighting how modern technology is transforming the role of a buyer broker, creating tailored home buying experiences

In this episode with Fred Glick and René Pérez Jr.

Join Fred Glick, Broker and Real Estate Realist, and René Pérez Jr., Salesperson and Pricing Savant, as they delve into the world of real estate with a series of informative and engaging discussions. From navigating the competitive real estate market and decoding interest rates to understanding the impact of climate change on homeowners insurance and the evolving dynamics of California’s housing market, this podcast covers it all. 

Gain valuable insights into strategies for successful negotiations, the importance of fully underwritten pre-approvals, and the shifting landscape of real estate commissions. Whether you’re a first-time homebuyer or a seasoned investor, Fred and René provide expert advice and explore the latest trends, technologies, and market conditions to help you make informed decisions in your real estate journey.

EPISODE TRANSCRIPT

[00:00:00] Fred Glick: Hello, everybody. My name is Fred Glick. I am in Southern California. Hopefully, we’ll get some birds here to visit us and come for a drink. And René Pérez, who’s up in the Bay Area and you are in Berkeley, I believe. Correct?

[00:00:17] René Pérez Jr.: Yeah. I’m in Berkeley. Great view. It’s a bit of an awkward lot, I will say, but I mean I’ll probably put a video on like what the interior looks like. And it’s just beautiful. I mean, the developers of this property really took the time to use high-end appliances, high-end flooring, high-end everything. Yeah. Yeah. Yeah. Great place out here. 3 million.

[00:00:40] Fred Glick: 3 million-ish. Asking price. Not after we’re done representing our buyer. Hopefully getting them.

[00:00:46] René Pérez Jr.: Exactly. Right. And that’s one of the things that it’s all about real estate. It’s like a list price doesn’t mean anything, you know, it’s a good guidance, no, but

[00:00:55] Fred Glick: That’s a really good idea. I mean, let’s talk about that. I mean, you’re looking on Redfin and you’re seeing Redfin or Zillow, they say, “Oh, this house is worth three million and it’s listed for three million.” Well, there’s a surprise. 99 percent of the algorithm is going to go to the sale price that somebody’s asking. So look at the Redfins and Zillows, but completely ignore them as to what you’re going to make an offer for because you know what? Everybody else is looking at that.

If you make the same offer and everybody else is in a highly competitive market. You have no chance of getting the property because it’s all about emotions. When you have 17 buyers who are putting in contracts, they’re all going to be different people. You can’t save 25, 000 here or there and expect it to slowly go up.

In this kind of a market, and we’ve seen it for years, you put your best foot forward and if you don’t get it, you move on. And that’s kind of it. I know René, you got a million things to say about this. So

[00:01:52] René Pérez Jr.: Yeah. I mean, it’s a struggle, right? Because it’s everybody always asks like, “Oh, what should I bid?” And it’s like, okay, has it probably been on the market for a long time? If the property hasn’t been on the market for a long time, you’ve got the struggle of two of two fights going on. One,

it’s

[00:02:08] René Pérez Jr.: more than likely overpriced.

But you also got hundreds of thousands of sellers that have tons of equity that don’t realistically need to sell. Right. So

[00:02:18] Fred Glick: Or they can afford to hold onto the place, you know, to make the payment.

[00:02:22] René Pérez Jr.: So it all boils down to like, it’s worth whatever someone is willing to pay. Right. And if they’re not willing to pay it, you know, what can we do?

[00:02:32] Fred Glick: Here’s the other ideas to think about. Put yourself in the seller’s shoes. What the seller wants to see is that they have no issues. And I’m talking about the competitive bids and the competitive bids are pretty much most of the good school districts in California. So we’re speaking of this in September of 2023.

And obviously, if you listen to this five years from now, it could be something completely different, but you have to go in to want to win and you can’t nickel and dime. I mean, it’s just stupid to nickel and dime and you have to be ultra prepared. So let’s start talking about ultra preparation, which is we’re neurotic about it.

And even in a quote-unquote bad market where you’re going to be able to pick up a property and there’s going to be no competition, you still want to be overprepared. And let me explain why. The seller wants to be as comfortable as possible with you as the buyer so you know, we have the fully underwritten pre-approvals, which I’ll talk about in a moment in super detail a short inspection period and because you’re super prepared, the seller may take lower because it’s like they don’t have to worry about anything.

You waive the mortgage contingency and it’s like, you know, if the inspections haven’t been done or the inspections have been done, let’s look at that. You waive the mortgage contingency, literally, you can go to closing right when the mortgage is ready. 15, 17 days as opposed to if somebody comes in with the subject to thing that waits 30 days, this is we can say to the seller, “Look dude, you know, it’s been on the market. Here’s our price. We’re super prepared, go for it.”

So let me swing into mortgages because one thing that really comes up to me about loan officers. Loan officers are not involved on a day-to-day basis negotiating for property. They’re not licensed to do it. They don’t, they don’t spend all their time.

So the way they think is, “Oh, we’ll give you an approval for up to the sale price that you’re going to offer.” And it’s the stupidest thing in the world you can do. And you’re sitting at home thinking, of course, I just, I don’t want to show the seller my cards. Well, here’s what you want to do. You want to show the seller you’re going for a million and a half dollar sale price, and you’re qualified up to 3 million.

Show that you’re qualified because then you can, then we can say to the agent and to the seller it’s like, “Dude, he’s super qualified. He’s not gonna have a problem. He’s overqualified.” It’s got nothing to do with the price of the house because if it does you have a really bad buyer broker who doesn’t understand how to negotiate the price. It is, so this whole philosophy these loan officers have about this is stupid, the other thing they tell you to do is don’t order the appraisal until after you’ve done the inspection.

Well, guess what? You’re gonna have to waste 500 hours and do the inspection and do the appraisal. You order appraisals on super rushes, you have to make sure you’re going to close. Please do not listen to a loan officer about how to negotiate your contract because it could end up being that you’re not going to get the property.

[00:05:44] René Pérez Jr.: Well, it’s not even about property or not. It’s about, you know, we talk about specific situations, right? If we wait a few more days, extra days for the appraisal and, and you’re on a tight 17-day closing. Those five days matter because, on the other end of the deal, you don’t know if the listing agent is going to give you an extension.

And the issue is that if you have someone who’s not willing to give an extension for whatever, you know, reason, just not being a fair counterpart, like not understanding that delays happen, you now have to pay for fees, late fees. You have to, you have the potential. It just gets worse. Why wait those three, four days when you can just get everything done?

[00:06:28] Fred Glick: Because they’re trying to save it because you know what? This is based on people who don’t have the money and just can’t spend it unless, you know, it’ll hurt them. And I understand that. But you have to look at your finances. If you’re down to that last penny to try and buy a house, you know, it’s aggravating and you just got to do it the right way to make sure that it’s going to go through us with an aggressive offer, you know, the loan officers.

They just don’t see it the way we do. And we, as the buyer broker are in charge of this. We’re the quarterbacks.

[00:07:03] René Pérez Jr.: There’s different ways of negotiating, right? There’s different ways of negotiating. And I think it’s fair to, you know, if you’re not in the market to say, well, I have two options to negotiate.

On one end I say, I just give the offer price, pre-approval. And let them just give us a counter. And the, in the other one, you want to show that you’re a really strong buyer. Now, if you show the pre-approval only to your offer price, you are insulting the other party’s intelligence. That’s just what it boils down to.

[00:07:31] Fred Glick: You’re lying. You’re lying. Yeah.

[00:07:33] René Pérez Jr.: Well, you’re lying. You’re insulting, right? And so

[00:07:37] Fred Glick: And now you get a counter. Here’s the situation. If you, you say you’re worth, you know, you can only get approved for a million. You put a million as your offer and they come back and they ask for counter offers and they decide, we’re not going to make you part of the counter offer because you don’t qualify over a million.

So your loan officer screwed you out of getting that house. So. That’s really the basis.

[00:07:57] René Pérez Jr.: And that’s the thing, right? Like, I think a part of our job is, you know, I get a lot of, a lot of, couples asking me, René, please, please help me get the house. It’s like, well, I’m going to do my part, but I need you to understand the fact that if you don’t show your best foot forward and you don’t show that you’re super overqualified, the agent on the other side is going to disqualify you.

And I don’t want to disqualify from start and that’s the only reason why we do it.

[00:08:22] Fred Glick: Right. In the contracts in California,

[00:08:24] René Pérez Jr.: We’re brokers because, because we’re the type of brokers, we’re not gonna make you just overpay just to overpay. That’s not what we do wanna do. We wanna negotiate the best for you because we say this time and time again, we want you to refer business to us as well, right?

Because we did a great job.

[00:08:36] Fred Glick: And we don’t get, and we don’t get paid based on the sale price of the house. Hello. It’s in our, it’s in our best interest to get you the best deal you can. But the other thing and this is the really important thing, is what’s called a fully underwritten preapproval.

And I say this 10 million times a day, you know, exaggerating, but you know what I mean? So we just came across a company called Cross Country who claimed that they, I’d gotten the underwriting thing and I read them. And it did not say that it was completely fully underwriter, but literally the loan officer, we told him we are waiving the mortgage.

So if the mortgage doesn’t go through our clients could lose their deposit, which was, I don’t know, like 75, 000 if they don’t perform. And that’s a problem. Okay, so that’s why we’ve been using the big banks, the Wells Fargo’s, the Union Banks, U. S. Bank, Chase, Bank of America because they actually take all the loans.

And by the way, we do this too. We have two lenders we can send this to that underwrite the file, give it to somebody called the underwriter. That is the only person in the company who can authorize the company to say yes, we are going to give this loan. It’s a commitment. You need a commitment. That’s the keyword.

So these guys from Cross Country, the loan officer finally like wrote me an email saying, “Yes it is.” So he lied to us because the day after we got into contract the loan processor said, “Oh great we’re going to get it into underwriting now.” I said, “Underwriting? This was fully underwritten beforehand. We were told that we wouldn’t have put in a contingent, a noncontingent mortgage offer.”

So it may not, it’s not just cross country. There’s a lot of people out there who do it. United Wholesale Mortgage, if you go through a broker, they have this program, they’ll tell you how great it is, but all it is is they run it through the Fannie Mae computer and do some AI stuff, but it’s not a really fully underwritten mortgage because here’s the problems.

There’s things you don’t know about that you think are fine. Like you deposited 50, 000 in cash that you just had lying around into your bank account last week. You think, okay, I’m just going to use that and then give them the bank state. Well, they want the proof of those funds. And guess what? If you can’t prove it, and especially cash, they don’t allow it.

Now you’re 50 grand short to close. So there’s a million different things that can go wrong. I’ve been in the mortgage business since Ronald Reagan was president. So I’ve seen them all.

[00:11:11] René Pérez Jr.: And I hate that, you know, and I hate that because that’s the mentality. A lot of mortgage brokers, that’s the mentality of everybody.

It’s like, “Oh, I’ve been doing this for a long time. It’s going to work.” And the thing is, it doesn’t matter that you’ve been doing it for 50, 60 years. It’s the, the matter of fact is right now. What’s happening right now in the industry? We have seven-plus interest rates, right? Lenders don’t want to just, you know, give everybody a mortgage because, at the end of the day, the banks own the house, right?

That’s just the reality of how the way of homeownership works.

[00:11:39] Fred Glick: Banks have no means on the house.

[00:11:41] René Pérez Jr.: Exactly. Well, but you get what I mean, right? At the end of the day, like if you look at simplistic terms, you know, you don’t really own the house, right? Until you fully pay it off. That’s my take.

You can disagree. But the matter of the fact is that if you’ve been doing it for a long time and you can see if the mortgage is going to work, that’s perfectly fine. The bottom line is you can’t just tell someone that, “Oh, you’ll be fine. You’ll be pre-approved.” Because there’s 3 percent in the middle of the, of that pre-approval and that offer. Right?

So unless, unless that mortgage broker is going to put it in writing and they’re putting their money in, then.

[00:12:19] Fred Glick: Well, let me correct you. Let me correct you. Don’t call the mortgage broker since mortgage brokers aren’t allowed to fund loans. We’re brokers. We don’t fund. We have Flagstar and Rocket and a couple of other companies who do the funding.

There’s a mortgage bankers and banks so that you need the approval from them. So if you get a mortgage broker who writes you a pre-approval, it’s a pre-qualification. It’s not anything. It’s not, it’s all about basically the approval needs to say, we will fund this loan. And maybe it’s based on the appraisal, the title report, you know, things that are out of the control of the buyer but we need after you you go into escrow so just be super careful.

Just make sure that the words are correct, use somebody that’s going to get it right. And obviously, you can ping us anytime we’re happy to help.

[00:13:08] René Pérez Jr.: In the way we always say this, right? We say this over and over again. Everything in real estate has to be in writing. So it has to be in writing that you’ve been pre-approved.

You know, you can’t take the word of anyone. I mean, you probably shouldn’t take the word of us either. You know, just we’re based on transparency. That’s all we’re here for. So just because we tell you something, sure, go ask around. But someone that really understands the pre-approval process is going to tell you what we’re telling you.

That’s all it kind of boils down. So, yeah, be careful of your mortgage brokers. Because the other issue is that we are in a market where sales are in the lowest they have been in a long time. You know, I read an article the other day where it was mortgage applications are at the lowest they have been in the last 27 years.

So there is a struggle to find business. So all these mortgage brokers then are not doing a lot of business. They just want to say, I have a pre-approval and they lie to you.

[00:14:07] Fred Glick: Be careful out there. Okay, on to another problem in, this affects the mortgages too is homeowners insurance. So Cal, especially California, and Florida, but it’s going to keep going and it’s climate change, climate change, climate change.

The all-state and a state farm pulled out of California, at least temporarily. I think they’re negotiating with the state to do some kind of a fair plan, or not fair plan, a reinsurance plan that, you know, they’re only limited. They have to pay X on a policy and the state can pay the rest for fires. Cause we have all these fires.

Florida, it’s all about the floods. I mean, it’s just insane. So thing you need to do, start calling around for insurance. As soon as you’re interested in a particular property, because it’s by address, so you can’t just generically call somebody. Stick with the bigger companies, they may also put you in what’s called a fair plan.

Now you can Google “fair plan”, but it’s basically a bundled thing. That’s kind of run by the state and the insurance companies just to be able to get people covered and it’s going to get expensive. So you’re going to have seven, eight percent interest rates. You’re going to have high homeowners insurance prices too.

So, but you know, look at one house that you really like call up an insurance agent. What kind of premium am I talking about? It might be like seven, 800 bucks last year. Could be 1500, could be 4, 000 now. You don’t know, but you’ve got to check on that.

[00:15:42] René Pérez Jr.: One thing and one thing I want to add about that is then when you go get quotes on the limited companies that are doing them right now, it used to be, you put them in the system and they just pre-approve it.

 The last couple of weeks, a lot of these companies are requesting pictures in order to approve the house. So if you’re at, if you’re in open houses, what you need to go do is take pictures of the surrounding area. That way it saves you time. It saves you a second trip and you have, you know, clarity of whether my house is going to be approved for insurance or not.

[00:16:11] Fred Glick: They want to see, they want to see it from every side and they don’t want to look at the MLS pictures. So you can’t give them that. Take a video too. And then you can always put a still out of a video. This way you have everything. But yeah, price it out ahead of time. It’s now becoming another one of those issues.

Talking about issues, we go onto this one. If you’re in a condominium and because of it’s just stupid underwriting, a lot of condominiums got through and it’s not a problem, but Fannie Mae, Freddie Mack, FHA, everybody has just said, you know what we’re done, we’re done. You have to meet certain criteria, and I have them all here and ready.

I’ll send this to you so you can post it up in here. But basically what it says is you need to have a reserve study within the last three years. They want to know how many people are 60 days past due on a special assessment. No more than 15 percent of the owners can be 60 days past due. Critical repairs have to be done prior to closing in a complex.

Routine repairs are allowed to approve in an annual upkeep of the building and there’s funds available. Special assessments, they must explain them, tell how they get approved, all that kind of stuff. But it’s that case study that has to do with reserve requirements because you have to have a 10 percent budget reserve line item.

Meaning if your budget for your condo is a million dollars a hundred thousand per year has to be set aside for reserves. The reserve study tells you how much you need to put away for say the roof, the sides of the building the interior renovations, whatever it is. So they’re getting tough on condos and what’s going to happen is if your condo doesn’t meet this criteria, you’re not going to be able to get financing.

Maybe you can get you know, 13 percent deals from Subprime people, but to get a real mortgage, you got to do it. Condos have to wake up and realize this. They got to do it today because they got to start planning. And if you don’t do it, the value of your condo is going to tank. It’s just, nobody’s going to be able to buy it.

There’s no value to it. So this is ridiculously serious. So get your condos checked.

[00:18:36] René Pérez Jr.: The big thing is, you know, one of the questions we always get asked is, you know, do you see any red flags on the HOA docs? Right? One of the struggle that we have with the communication between buyers and sellers is nobody really knows what the HOA documents say.

 The only person that can really answer that question is the HOA itself. There’s always going to be a phone number on top on the top left, or right corner. The HOA should and want to be able to tell you what the latest news are and don’t just

[00:19:09] Fred Glick: No, I was gonna say there’s kind of two parts to that. The HOA meaning you’re going to get a phone number for the HOA management company, so, you know Joe Schmoe Management Company.

You know, they may only talk to a lower-end person who doesn’t know or whatever, but also you want to talk to the condo president or vice president. Somebody’s on the board. That’s who you really want to talk to and say, “Hey, what’s really going on?” We just had a condo sale in Marina del Rey where the agent lovingly tried to sneakily tell us, not tell us about this possible special assessment, and it ended up costing him. I don’t know, 50 grand in price because he wasn’t transparent. So you want to dig into these condos.

[00:19:53] René Pérez Jr.: Well, that’s the thing, right? Like a lot of the board minutes, might not have the full context of things, right? So, if you’re a buyer, more than the diligence that you know, go to the lobby, see if there’s any, like, in the condo market, you have a little bit more flexibility in not having to rush and make a bid within the first two days that it’s been on the market.

So what you want to do is, you know, you go to the condo, you look at the main lobby, you know, the elevator where they have these get together, these happy hours, you know, if you’re really interested in knowing like how it is going to be to live in that community, you know, go to that happy hour, go to that networking event or whatever it might be and talk to the neighbors, right?

The neighbors are going to be the only ones that tell you the truth. The real truth, right? And it’s hard. It’s hard. It really is hard for anyone who is quote-unquote complicit on trying to get the property sold to tell you the truth. That’s just the reality of it. So I’ll ask the neighbors. I think that’s my biggest response as to how the HOA operates.

[00:20:50] Fred Glick: It’s a good idea. Good idea. Okay. Getting into some more stuff. So here’s something interesting on a mortgage side. If you’re an investor and doing a 1031 exchange, and I won’t bore you with what that is. It’s for people who know what it is. There’s a way that you can actually buy the replacement property before you sell the current property and it’s called a 1031 reverse.

And we have a lender that will actually finance that. Because you still have the other property as and the principal and interest payments and taxes and insurance on it. So what they do is they say they know you’re getting rid of this within six months or whatever. So they don’t count that debt against you.

Whereas if you went for a regular mortgage, you’re going to count the debt against you. So it’s going to be harder to qualify. So, we just wanted to let you know out there that it can be done. We have one lender that does it. Don’t be scared to buy a property first and then sell your current property, especially if you’re working on it or something like that if the opportunity is there.

[00:21:55] René Pérez Jr.: So what happens, what happens if you, if you hear this podcast and you bought a property and then you later decide to sell your property and do a 1031 exchange, would you be able to right now, the second use this program to get it?

[00:22:10] Fred Glick: Oh yeah. Because the idea is you’re going to do a 1031 exchange, you’re going to exchange the current property you have.

So what you want to do is buy the new one first, can be done, and then you sell the old one. So that’s really cool. That’s kind of a new thing. It’s going to help people, especially in this market. If you find a good deal, you don’t want to wait, you know, you’re thinking, “Oh, I got to wait to myself.” No, you don’t have to wait for yourself.

So anybody who does reverse mortgages, I mean 1031 reverses, and I’m talking to agents. I’m not talking about the reverse mortgage for older homeowners. That’s a whole different world, which we don’t even get into. Okay, moving on now. I wanna cover some stuff about one of our competitors and what they’re doing, what’s going on in the market, and specifically about a couple of different areas.

So let’s start with our friends at Redfin. Now, to be honest, every one of our buyers, we tell them, please use Redfin to look for property. Cause Redfin is great. They give you not only the school district, but they tell you the competitive score, they show some good graphs. They got, they have a nice, nice product.

What they used to do is rebate to buyers. And now they have decided nationwide to stop the rebates. So we’re happy to take over for them because our quick commercial. We do buyers in California and Washington and Pennsylvania and Texas. Right now we’re gonna, we’re licensed in Georgia, but not active, and who knows where we’re going to be next. But we charge a flat fee of nine thousand seven hundred and fifty dollars and you get the balance of the buyer broker fee whatever that’s going to be. Who knows what’s going to happen with all these class action suits with the real realtor stuff, but for now people are doing two and a half to three percent of the buyer-broker commission and we give it back to you. You can use it in the offer. You can get it after closing.

It’s tax-free for income purposes. You’re just Playing it with your basis for long-term capital gains. So that’s great news for us, and they’re decided to go a different direction. Comments or any?

[00:24:28] René Pérez Jr.: Well, I mean, I think the biggest comment is you always hear the conversation of, you know, how much do does the real estate broker charge and our people discounters and you should get paid more and et cetera, et cetera.

Right. I think from the stand, from the viewpoint of Redfin, what happened with Redfin is they realized that they were taking a lot of market share with doing the rebates, right? And at some point, people realize that you do a good job and then you don’t necessarily need to charge less, right?

And that’s, that’s totally, I personally think it’s fine, right?

[00:25:05] Fred Glick: They don’t equate themselves with Berkshire Hathaway and CalPERS and everybody else.

[00:25:10] René Pérez Jr.: But here’s the situation, right? Here’s the big thing. I think that at the end of the day, like whether, whether you’re charging 5 million percent or you’re charging, you know, 1 dollar to do the commission, it’s the idea of knowing exactly how much you’re being charged.

Redfin, you know, kept the whole commission changed, you know, hidden, right? And that’s something that we want to kind of take a look at, and here’s, I don’t, I won’t talk a little bit too much about the National Association of Realtors in this video, right? But the reality is that there is a change in the dynamic.

One of the biggest things that you often hear in real estate transactions is that buyer brokers always say that the seller pays the commission, you know, and I think that’s one of the biggest fallacies in our industry. And I think we’re finally getting to the point where people are starting to understand that we need to be transparent or else there’s going to be lawsuits on commissions, right?

Because the reality is, and there are a lot of lawsuits. But here’s the big, the big kind of context, right? When you are purchasing something, you are paying for it. So, who pays for something? It’s whoever is paying for the product. And obviously, if you’re selling a product and you’re paying someone, you’re also spending money on it being sold.

So the reality is that it’s always, it always has been where both the seller and both the buyer pay commissions. And that’s what you really want to know. You really want to make sure and ask the question, how much am I paying you? And if an agent tells you, if an agent tells you, “Oh, you don’t pay commission, the seller pays it.” You know, run away from them because they’re being transparent, but the lack of, I don’t care

[00:26:49] Fred Glick: The other lie is rebates are illegal in California. That’s another lie we hear all the time. It’s like, really? That’s because you have nothing to come back with.

[00:26:59] René Pérez Jr.: And that’s my whole point, right?

[00:27:00] Fred Glick: The other thing they sell you on is their value. There’s a value to using us at two and a half percent. Give me a break.

[00:27:07] René Pérez Jr.: Well, and I’m looking at our agents all day, right? But the thing is that there are, there are some agents, you can hire an attorney, you know, and, you know, pay them by the hour. You can hire an agent that charges you 6%, you know, and spends every single second with you in the open house. So it’s about the concept of you knowing exactly what you’re getting, you’re paying for.

That’s all that we can take inspiration and make sure you understand that.

[00:27:34] Fred Glick: Yeah, there you go. Moving on to market conditions, which is always fun with us and we’ll start in San Francisco itself. So I have alerts on my phone which is ridiculous, but not with noise, thank God silent ones, of every property that Redfin puts new, a change, a sale, whatever. Just a change in the property itself.

So I see everything. Okay, new listings, what sold the whole nine yards? San Francisco has slowly coming on with a lot of listings. Now, one of the reasons is because the San Francisco MLS was hacked. Believe it or not, they did not have an off site backup of the thing. It’s like, are you idiots? This company called Rapid Tony rapidly becoming stupid every day.

I mean, yeah, exactly. So don’t ever do anything technology-wise with them because they got hijacked and their insurance company had to negotiate a payoff and now it’s back on. So there was a couple of weeks where the thing was dead. Now there’s other MLSs in the area. We belong to the other one. You know, we just can move things around.

It’s not a big deal. But anyway, there might have been this temporary hold on listings because of this problem. But having said that at the same time, you can google this China’s in trouble. They’re builders. They’re developers They’re dying. They’re getting close to bankruptcies. The economy is slowing down there. I won’t go into the whole details.

But here’s the, here’s the thing. Starting in like 2007 when the economy went to crap here, the way things ran in China is that every 10 years you would get a new leader. And so if you weren’t on the bandwagon with that leader, they would literally cut you off cut your business off, mess you up. So the idea is everybody wanted to get their money out of the country. So they go hide it in America and they hide it in real estate.

So what they were doing is they were buying these gorgeous properties that people just had to get rid of because of the crash. Buying them from as low as they could, literally shutting them down. Not a nothing. Because they don’t want to operate it. They don’t want to have to pay for it. They just were sitting on a piece of land that happened to have real estate on it.

Now they need the money, but also now they’re going to get a substantial profit on this money. So it’s kind of, you know, it’s two kinds of things where you’re making a lot of money. It’s time to go because you need it. So there’s going to be possibly a flood of property on the market in San Francisco to not bring prices down, but to stabilize the prices.

And kind of get a more of a plateau. There’s always going to be this spectacular property It’s going to get a little extra, but we’ve seen a decent amount of traffic in San Francisco too. It’s it and on the news and on Twitter and all that. It’s like oh San Francisco. Oh, it’s taken over by the current.

Yeah that crap exists, but you live there. I’ve been there It’s still normal living down there and yes Union Square is not what it used to be but living out in you know Western Addition. I mean, it’s still the same. So people are still looking there. There’s certain good school districts, you know, we’ll see how the – does, what do you think?

[00:31:06] René Pérez Jr.: And here’s the thing, right? Like we’re always asked about like, oh like, is it a good time to buy? And especially in San Francisco. Right? And there’s certainly always one property that’s in the market, right? There’s an inventory problem, not because there’s no houses in the market, it’s because the houses that are on the market are either unfinanceable or they have, you know, incredible problems. There’s an, there’s a neighborhood effect on the property that’s in the market. But the good lots, I mean, we have buyers that have been looking for a San Francisco house with a view for more than four or five years. People that, you know, want to upgrade the house, but they just can’t find anything because the people who live in San Francisco, they sometimes decide to just keep the house empty rather than sell it.

[00:31:52] Fred Glick: Great rentals, great rentals, great Airbnbs.

[00:31:56] René Pérez Jr.: Exactly. Yeah. Yeah. And that’s something that’s a good, actually talking about Airbnbs, you know, I think a lot of our, a lot of our consumers, you know. They want to buy a house and Airbnb. They see a video saying that they can have it as a rental property.

And, you know, there are laws that are coming into an effect, like New York. Like New York has put a ban on Airbnb where if unless, unless the owner doesn’t live there, they can’t rent it out. So, you know, just take that into consideration. It can happen in California. And I think I’d welcome that, you know, I don’t know if I want to publicly say that, but you know, having an Airbnb, you know? You know, but having an Airbnb, you know, makes it so that a first-time homeowner can’t buy a house, right?

Because it’s such a great rental. Because it’s always going to be filled with people. Right. And, and that’s been the issue with the home crisis. There’s not enough inventory in San Francisco. It’s a two-mile long place.

[00:32:52] Fred Glick: Exactly. Well, now let’s get into market conditions because this is the perfect thing. So there are reasons that people, there’s not enough inventory and that’s one of them.

Rentals, Airbnbs are making enough income. The people who have the two and three-percent mortgages are kind of locked into these places. The people who live in California are generally not as you know, if there’s a lot of one-story houses, older people can live there forever. We went on a listing appointment that they decided not to list.

Which made sense, because mom can get around on the first floor and it’s just crazy what they can do, so they augmented that. So add that to the fact, and this is the most important thing that no, that does not go into a statistic. People like living here. It’s California. Yeah, we hear people, we got the ocean, everything we’ve got, yeah you pay a little more for it.

There’s a price to live in, to be able to afford California. There’s no doubt about it, but there’s enough people who can afford it. There’s enough tech companies and other industries that bring in people, make money, pay them. Well, yeah, I mean the other end of the spectrum is horrible, but for the people looking to get into that nine school district in, I don’t know, let’s use Cupertino because that’s been our fun place.

I mean, stuff just comes on the market for 2 million and goes for 27. And so, you know, we got buyers, “Oh, it’s 2 million. We’ll offer two one.” It’s like,

[00:34:27] René Pérez Jr.: I want to talk about the Cupertino market specifically right in the Palo Alto market, right? The market conditions are still in effect where agents will put it, put a house in the market for 1. 9 with the expectation that it will be bid up.

Now, I know it’s easy to say, oh, in California, the market, the interest rates aren’t affecting in, and just say everybody wants to live here. So I will say the market has been affected, right? But here’s the context when interest rates were at 2%, you were seeing, you know, upwards of, you know, 50 offers on every house.

Now, that doesn’t happen. Now, a lot of properties have four or five really good offers. Now, even last month, there was a property in Santa Clara that had 160 disclosures downloaded and 50 offers. And that’s all, I know I’m kind of jumping from one place to another, but that’s all because the price of it’s how, it’s how you price a property where you’re going to still get 50 people that want to buy one house and that’s the struggle, right?

So have, has interest rates affected the housing market? Absolutely. You’re not seeing that many buyers. A lot of the people that are living paycheck to paycheck that we’re just hoping to just get into that 1 million range. Those are being affected tremendously. But when you have two incomes, a high tech-paying jobs, both partners are making 200, 000 a year.

People are still willing to pay that 2.5 million and there’s a lot of people that are in the market for that range. So that’s it.

[00:36:08] Fred Glick: One thing about interest rates that are interesting. You forget about this because you look at the mortgage rate and let’s pretend it’s seven when it used to be three. When it was three, you were getting literally 0.01 on your money. So let’s say you’re getting zero.

So there’s this just about almost three percent spread between what you borrow and what you, what you get. Now at seven, you get four and a half percent interest rate. So, you know, you’re looking at two and a half is the spread between the rate you have to pay and the rate of your savings.

So yeah, you’re taking part of the savings. You’re putting it into a house, which is continually appreciating. So if you look at just the core mathematics of what you’re doing on investing, you’re coming out basically the same now as though you did a three percent loan. I know it sounds weird, but also the beauty of it is you’ll be able to refinance that seven percent mortgage.

So if you get it down even a four, four if you get it down to four and a half. And even at that point, you’re not making money on your money. You’re now making money on the appreciation of the house. So in essence, if you long, look at this long-term buying the house at seven actually isn’t that bad? I know I’m sounding crazy. But you still have to afford,

[00:37:29] René Pérez Jr.: I mean, we talk with finances. We talk with finances and I mean, yeah, if you look in a really long, long, long, long-term market condition, of course, you’re going to come out, you know, on the, on the high ground. And it’s gonna make sense financially.

But one thing that I, that I hate hearing the, the phrase, you know, marry the house, state the ring. Right. Because, you know, we. You can’t tell me when rates are going to go to 4 percent again. No, you can’t tell me.

[00:37:56] Fred Glick: I want to make a point about that because here’s the problem. The guys who buy the mortgage-backed securities all over the world for, you know, the Saudi government and this fund and that fund, they know that inflation is going to calm down and they know the interest rates are going to come down.

So they’re saying to themselves, why should we finance mortgages now for 30 years that we know they’re going to get paid off in a year or two? So really if interest rates are at seven. They’re really six and a half. They have bought these rates up so that they get a really good return. So you’re getting screwed.

Isn’t that lovely? But that’s the way it works. So eventually they have to come down and there’s competitive and all these mortgage companies need to make some money and it will, and inflation is coming down, albeit slower than we thought it would. And the Fed, you know, the Fed hammered it. And really what, what it was is people were making money and nobody was complaining.

So they kept prices high. So hopefully we can, we hopefully not hopefully, but what’ll happen is probably we’ll be in a little recession where they have to start lowering, lowering prices. And then that’ll get stabilized. It could take two, three years. Now it’s taking a year, but eventually, you’re going to be in this house longterm.

And that’s the other thing we talk about people. Oh, I don’t think that house is worth 2 million. Well, guess what? How long are you going to live there? Oh, I’m going to have this 20, 30 years. Well, if you pay an extra 25 grand now, are you going to remember that in 20 years when you sell it? No, you’re going to be thrilled.

You pay the extra 25 now to get into the house. So you have all the equity later. So that’s, you can’t look at what you pay for a house. If you’re going to have it long term, there’s going to be ups and downs to the markets.

[00:39:34] René Pérez Jr.: I don’t even think about the equity it’s and stuff. Right. I think. I know we just easily throw around 25, 000, but the way I see it, I don’t know. But the way I really see it more is like, okay, put that 25K into context of every weekend.

You know, how much do you value your time? There’s people that have been on the market, you know, being really picky about the price and wanting that specific, they don’t want to go above a price per square foot. But if you do that every single weekend. For an entire year, how much time are you wasting on looking at

[00:40:06] Fred Glick: How many dollars have you lost?

You could have bought the house a year ago. We have people to come to us. Hey, I started looking in 2000 and I blew it on the first round and now I want to get it. Yeah. It costs them three, 400, 000 bucks in price. So it’s like, get into this. Here’s the other thing. Get into this market. If you’re serious, understand the market.

Understand what you’re gonna have to do to win, and we can show you examples. Give you an idea, we can give you all the comps in the world, but everybody sees the same comps. So you gotta go comps, plus the fact that it’s been a month and there’s more buyers, plus there’s more buyers who are determined to live in there. And the competition

[00:40:47] René Pérez Jr.: Well, I think you did a really good job last time. I think I’ve explained the whole comp situation, right? A lot of buyers ask, you know, “Oh, what’s a comp for this house?” And the big issue is that you know, even if we give you a comp, you know, you’re going to become the new comp in two months, whoever buys that house is a new comp.

So you can’t expect anyone to really give you exactly what your house is valued at because the only way to really give you that context is once you buy in, you become the new comp because it’s going to appraise. We are, we’ve already talked multiple times about how the appraiser gets a purchase contract and magically it’s going to appraise to whatever you’re paying for the houses.

[00:41:30] Fred Glick: They know the sale price ahead of time.

[00:41:35] René Pérez Jr.: It’s -, Yeah.

[00:41:37] Fred Glick: It’s a comp, sometimes they come in low sometimes because here’s. What they do is they make an adjustment called a time value adjustment, which is a made-up number really. Cause the appraisal is an art, not a science it’s based on science, but it’s really, to get it you have to do a narrative and you have to explain it. Hey, properties are going up 2 percent a week because of the demand. So most of the time it’s going to appraise. If it doesn’t appraise, then you’re going to have to pay the difference between the sale price and the appraised value. And that’s what we like.

That’s why we like to show that our buyers have more assets than they’re going to possibly need for the down payment. Cause if it does come in low, we’re going to have enough money to pay the difference. Again, being that strong buyer, like we talked about, so. We can go on about appraisers forever and I’m going to get an appraiser I know on a podcast later and explain all this in more detail, but, market conditions on, on top of that. You know, you just got to keep your, if you want to get into this, the bottom line is, as I said, know the market, know exactly what you’re getting into, because we talk to people all the time and then, you know, they get into like their first deal.

“Oh, here’s one I found for 2 million. It’s be great.” And blah, blah, blah. And I was like, “Yeah, it ends up going for two six.” And then they disappear. Cause it’s like,

[00:42:59] René Pérez Jr.: And there is market weakness, right? It’s a really conflicting paradox, right? It’s like, just having someone with two personalities, you know, around here because, you know, things are still being aggressive.

But if you look at multiple properties that have been in the market for a long time, especially on the outskirts of like the Bay. If you go into the outskirts of like Riverside, which is SoCal, you see things that are staying in the market longer than they used to be. There are places that take, you know, 2, 3, even a month to go on the.

To go pending where, you know, eight, six months ago, it was just taking a week, right? So it’s nobody, we, we don’t want to say that it’s a hot market and that everything’s going to go 200, 200K over list, but for the nice house that has a great lawn that just came to the market that has 50 eyes on them, it’s going to be competitive.

[00:43:57] Fred Glick: In a really good school district.

That’s the key. This is all about buying a school district. That’s you’re buying land. The property is going to have problems. They all do, you know, you read the inspection, it’s going to cost you a couple of grand to get it cleared up. You can’t argue with the seller, you know when you have multiple bidders too.

So you have to get into knowing your, you might have to do stuff. So that’s the other thing you want to be prepared for. Jumping in naked to these things sometimes, but there’s people out there been looking for a long time. There’s people out there with cash. And I won’t go into this now we can do another thing on it But we have a swing loan program so you could be as close to being cash as possible. Even if you don’t have a house to sell this is new so you could be an aggressive buyer and close in seven days you know, with this short-term temporary financing, but there’s a bunch of stuff out there.

Get yourself, you know, comfortable with a buyer broker and get yourself extremely overprepared, and depending on the house, you got to be aggressive. I mean, you know, with us, you can use the rebate balance to give it to the seller as part of the offer. We’ve won deals because of that, you know, just 50 grand left and it’s 2 million offer your offers out to 2050.

[00:45:17] René Pérez Jr.: And we’re in the market. I mean, the reality is we’re in the market where, where people are losing deals for 5, 000. You don’t want to look, always look at, you know, the context of what that 5, 000 are. Do you really want to lose the house that you can make a home for the 5, 000? It’s just, it doesn’t make sense. It just doesn’t. Yeah.

[00:45:36] Fred Glick: Got it. Got it. I think we’ve pretty much covered it and scared everybody off.

[00:45:45] René Pérez Jr.: Yeah. Yeah. I mean, every person’s conditions are going to be different, you know, every location is going to be different. So, one thing that we’d like to know is, you know, send us over a specific home that you’ve liked, a specific location, and we can kind of dig out that specific neighborhood to see what the context of that neighborhood will be.

Because there’s, the great thing about living in 2023 is that you have 20 different apps that can tell you how loud a neighborhood is, even though it’s not always accurate, but there’s ways to find out, you know if there’s going to be a pollution if it’s a flood zone and if the flood zone really is going to affect you or not, you know, you can see a lot of these data points that you weren’t able to see 20, 30 years ago. So, there’s

[00:46:34] Fred Glick: Right into the whole nature of a buyer broker has changed because we don’t go out most of the time and tell people, “Oh, this is the kitchen.” You know, because you can see a house, you get it, it’s inspected. Yes, we can go to the house and, you know, afterwards, if you’re super interested, and there’s questions, but, you know, used to be, I would go out with clients to every single house and we’d have to. And there’s no inspections ahead of time and you know, it’s just a mess now.

It’s so much easier. So it’s better.

[00:47:01] René Pérez Jr.: Yeah, exactly.

[00:47:02] Fred Glick: Anyway, I think we’ve, I think our brains are going to explode. I think we covered a ton of stuff, but we’ll put our, you’ll find our contact here. We’re Arrivva, arrivva.com. We’re licensed in California, Washington State, Texas, Pennsylvania, and Georgia right now. For mortgages, we’re in California, Pennsylvania, Texas, and Florida. Anyway, we’re happy to help. And we’re here

[00:47:31] René Pérez Jr.: And if there’s, yeah, no, I mean, one thing I want to add, and if there’s any specific topic you guys want to talk about, you know, have questions about, let us know, we can create a podcast specifically for that, you know, that’s always

[00:47:41] Fred Glick: Happy to do that. Okay. Hey, good luck, everybody.

Enjoy. And, we have beautiful weather cause we’re in California. All right. See you later.

[00:47:52] René Pérez Jr.: Bye.