Matt Hodges with Presidential Mortgage and I are on Rick Moore’s show once or twice every year, and it’s always a good conversation. These are some of the notes I took while we were doing the show live. Listen to the podcast at Charlottesville Podcasting Network.
- Thomas Jefferson Planning District region grew by 10.5% in last decade
- A story I wrote in 2016 about unsatisfied buyers; it’s worse now
- Local lenders
- Property inspection waivers
- Appraisals and waivers
- Nose blindness
- Pinterest and commercial real estate
- Firefly and broadband in Nelson County
- Remote work’s future
It’s automated, so please forgive the mistakes; bolding is mine to note topics
Rick Moore (00:13):
Hey, good morning, everyone. Thank you so much for being with us. Once again on Sunday morning, wake up call. As we talked today about the real estate market, our guest Matt Hodges. He’s a Charlottesville branch manager for presidential bank mortgage and Jim Duncan broker partner at Charlottesville’s nest Realty. Good morning general. Hey, Rick Warren. Thanks for joining us again today. So I’m curious as someone who is not looking for homes, although my wife regularly sends me imagery for checking out this home and that home, what is going on with the current market? Should I be looking for a home? Should I be happy that I’m not looking to buy a home?
Jim Duncan (01:06):
Yes. I think as you know, Rick and thanks for having us back my answer to almost everything is it depends you know, the, the Charlottesville area market right now is to put a pin in it. The strongest sellers market I’ve seen in 20 years the, the activity, the buyer activity with, you know, this is a broad brush and the buyer activity we’re seeing right now in our market is through my lens unprecedented you know, the we’re seeing offers, you know, five, six, 10, even 18 or 20 offers on properties. And these are predominantly in the city of Charlottesville and you know, the County of Albemarle. But I talked to, I ran into an agent here today who said that she went to a house to show it in green County and there were 20 people in line to get in.
So it’s, it is ridiculous right now. I think with any market pricing is key, but in some, in some aspects, pricing is almost irrelevant. You know, cops the, the sold comps that we’re seeing are not reflective of, of the, the pending prices that we’re seeing in the shelter area. So I think it’s, it is extraordinary sellers market. And I think on the flip side from a buyer’s perspective it’s if you’re buying, and I’ve said this for a long time, if you’re buying for a longer horizon, five, seven, 10, 12 years, that’s most of my buyers are I think that you should be, you know, candidly, I do a lot of work with buyers, somewhat intimidated but also mindful of the fact that a projection for population growth in our area is significant. You know, supply and demand is a, is a real thing. You know our County grew nearly 12% in the last 10 years. City grew about 14% in green County group, 10%, right? Suddenly I think that we’re seeing an influx of people that, you know, there’s, as long as there are more buyers than there are sellers right now, it’s an exceptional market for for people who are looking to sell and it could be a good market, but looking to buy for the longterm.
Well, is there, is it possible to put an average home price these days? Is that, is that a phrase you can use the average home price?
No, I mean, I think that it’s it really does. That really does depend on the market segment. I mean, a three bedroom, one half bath in the city of Charlottesville could be $400,000 and then one in Fluvanna. You know, I showed one day today, it was like, I think it was three beds, two baths with a full finished basement on a couple of acres for four, nearly $400,000. And a condo in the city. She also is going to be, you know, four to 600, at least. So there’s, there’s no sale. There’s no such thing as an average price. It really is depending on your micro market and where you fall within that, within that market range. Okay.
Are we driving out large groups of current residents, people who grew up here, for example,
I mean, I think the people who grew up here I mean, I think, yeah, in some, in some regards and I was talking to a former client of mine on, on Twitter day actually. And she was reflecting how in her market, if somewhere else, the place where they bought five years ago, they couldn’t afford today. And so I think that people who grew up in Charlottesville you know, you’re a first time home buyer starting out, you know, 25, 28 years old. Unless you have an exceptional job in income and, you know, candidly parents helping you out is, is, is often the case. It’s a challenging market. You know, so I think what we’re seeing now is that we’re seeing people are, are dry, are being driven, you know, figuratively and literally to the outer counties, to the anti-green Louisa, even Nelson to find a home that is desirable and suitable for what they’re looking for.
We are talking about the real estate market in our area, Jim Duncan, he’s a broker and a partner with Charlottesville and that’s real too. We also have Matt Hodges with us today. Matt is with presidential bank mortgage, Matt. We were talking about how strong the market is. And Jim mentioned going to a showing or a friend talking about a show in, in Greene County, where there were already 20 people in line. Are, are there both, what are the good and bad decisions in a thought press process in order to be the number one selection and buying this house? If the seller has, has a long list, has 20 offers on the table, is it more to it than just being the highest offer? I mean, what do you do? I would think that you, you can try and offer more than other people. What, what are the good and bad choices and decisions to put out there?
Sure. So I don’t get involved too much in that contract offer. But I add value to the discussion. So there might be a discussion with a property that comes onto the market in the city, and we know that there’s going to be multiple offers. And so the discussion point between me and the realtor and the potential purchaser is, okay, what number are we going to look at to make an offer? And then what’s the escalation clause. So that’s a an additional amount of the buyers willing to pay over the next highest bid in certain amount of increment dollars above it. And so that’s one of the things that we have a discussion about. And just anecdotally, you know, I’ve been involved in numerous of those situations where you have six, eight, 10 different buyers. And in some cases you’re issuing multiple pre-qualifications for two different clients, two different realtors. Nobody knows that because you can’t tell each of the parties, but that happens sometimes. So it’s really just giving the client that you’ve got in front of you. The best advice along with a realtor on, on what is going to look attractive. And most importantly, it’s fits their financial goals. We don’t want them to, to bid over asking price simply to win the deal. It has to feel right to them. It has to fit their budget, not what I can approve them for what they feel comfortable writing a check for each month.
Yeah. And Rick, I, you know, I think when Rick real quick, when it, when I’m helping buyers put together the right offer for them you know, I’m going to answer this two ways from buyer and seller from a buyer’s perspective you know, it has to be an offer they’re comfortable winning or losing if they, if they’re, if the asking price is 400 and they go in at 400 with an escalation to four 60, which would be crazy, but maybe not they have to be comfortable if they want, if you will, if they’re asking 400 and they can offer three 95 going to four or five and they lose, okay, Hey, see the value is what you’re willing to pay. And I try to encourage my buyers to not make an offer, to beat the other people, but make an offer that you’re comfortable winning or losing.
And from seller’s perspective, never heard a story years ago that it talks about how it’s, it’s more than price. And in this current market, you know, sometimes if it’s a buyer’s offering cash, that’s certainly appealing because most often appraisal was not an issue because the buyers are not getting an appraisal, but it’s also, you know, you look into the closing date whether that buyer of your house is making a an offer that’s contingent on the sale contingent on the sale of their house. What’s the closing date was the financing date. Who’s the lender. It’s a matte, adding value having a local lender such as Matt. It makes an enormous value because you feel, you know, I instill comments to my clients that Matt will bring value and he’ll actually be able to close versus some of the unnamed lenders that are, you know, who may or may not be able to. So it, it, it’s not always about price, right? Certainly it’s a huge factor, but you know, my ag clients, the other day lost out, they were a higher value or higher price, but some components of the offer were such that the seller chose a different offer. There was a little bit lower. So it really does depend on each scenario, a taste of what makes the best offer if you will.
So with, without getting into, I don’t want to turn this into a into a sales pitch for who Matt works for, but how does a local lender bring value into my search for a house or my sale of my house?
(Jim’s Note: great discussion here about local lenders’ value)
Okay. So just from my perspective, this is not about selling Matt. It’s really about working locally because those people are living in our community, they’re responsive to realtors. They understand what a commitment date means. They understand when to order an appraisal visa B when they inspection occurs, if you’re dialing an 800 number you’re going on to a website those people only look at you as a number that gets pushed along. And it closes whenever it closes. It’s really important to be responsible and responsive in our marketplace, regardless of what position you carry. So there’s tons of great loan officers in this town. I liked most all of them. It’s really about doing the right thing for the process, the seller, the buyer here locally,
And Jim, your thoughts on that.
Yeah. I’m not selling that. I work with disclosure. I worked with Matt a lot and have for 15 years, I think.
But you know, he’s one of a few local lenders that I recommend to my buyers. Because I know, you know, Matt is never a member of the community is accountable to the client. No, to me, to the, to the realtor community where, you know, if he puts his name on a letter saying these people are qualified, particularly in this environment that seller’s going to be able to say, Oh, well, my agent says that match. Matt’s good. He’s probably going to be able to close. And when I’m helping sellers evaluate multiple offers, the lender is a, is one of the factors, you know, it, as far as they know the people, they know the attorneys, they know the processes, they, you know, property tax rates, which a lot of these the national lenders don’t have that insight for some reason, they know how we close in Charlotte.
So they’re, you know, local lenders are familiar with the nuances of our market and how we work. And I, I can, I can, I’ve got stories from clients in one, let me publish it because he was so upset from a bank, a big lender that, you know, screwed things up. They closed eventually, but it was a pain that was unnecessary. See, I mean, that’s great. And we have a number of great local lenders in the Charlottesville area who, you know, I, you know, there are many evenings I’ve had where I’m at nine, nine 30 at night, I’m texting Matt and I’m texting the other agent. I’m texting on the phone with my clients that would match they’re answering questions, you know, and my clients like y’all really do this at nine 30 or 10 o’clock on a Friday night. I’m like, yeah, this is what we do. I don’t think I would get a, a big unnamed lender to be texting me at nine 30 on a Friday night.
And just so the callers know that this segment of the discussion is more about, I guess, shopping local than it is about the particular than it is about Matt in particular, which is why I asked that question, because I didn’t know what the answer was going to be. Again, I guess that as you talk about the real estate market is Jim Duncan with Charlottesville nest Realty, Matt Hodges, with presidential bank mortgage. Jim mentioned earlier, you can read some of the articles he’s written. You can go to real central va.com and sign up to get his, get his articles. Gentlemen, we’re talking about the strong market and some of the good and bad decisions I had read about property inspection waivers. Can you talk about that? And I’m not sure who’s who should jump in first, who has more hands in on that.
So that’s clearly in my court because it has to do with what lenders will accept if financing involved
Now if it’s a cash deal, you know, appraisal can be waived. Inspection can be a way, but if we’re talking about a transaction that has financing attached to it there are options for both Fannie Mae and Freddie Mac loans, which are the two largest producers of mortgages out there. There’s options with as little as 10% down to waive the appraisal. And of course, we’ve got to run, what’s called automated underwriting. In order to write a pre-qualification letter for Jim or for anyone else, and in that automated underwriting, it gives us a result of property inspection waivers acceptable, or it’s not. And if it is, it can strengthen the prequalification letter. So that the seller feels more confident about that piece. Of course, the client has to agree that they’re willing to waive it because they don’t have to wait even if we have that result. But it might give an advantage to a buyer. If it’s after the contract’s been ratified, it’s an option. It’s something that the client can consider. It’s a savings of $600 of the appraisal, but they don’t get the validation that the sales price equals the purchase price. And that may be where Jim can step in and, and say what his personal preferences is in general, but not necessarily in a specific situation.
Yeah, I mean, it, it depends, but if I’m representing a seller you know, I would love to get an offer that is that waives the inspection. It makes difference into my seller seller’s perspective and makes a much cleaner offer and a much greater likelihood to go into close from a buyer’s perspective. In 20 years of doing this, I’ve had one buyer has not, or is not able to talk into getting how much traction during the previous hot market. And they actually turn tore the house down. I think it’s, you know, regardless of the market, I think it’s absurd to waive a home inspection. That said there are some ways that I navigate this, this sort of thread with my clients that they can protect themselves while waiting the home inspection. But no, I think it’s, you know, that not only is it a an opportunity for the buyer to learn the house is their protection against you know, finding some sort of significant structural defects that would absolutely affect their decision to buy the home. Now I’ve got a seller that,
Oh, just for the, the listeners’ clarification. We’re talking about two different inspections. Jim’s primarily focusing on the home inspection, I’m focusing on the appraisal inspection. So and I generally agree the home inspection
Is a vital piece of the home buying process. So I’ll go after the appraisal real quick, you know, it’s, again, it does depend, but I think it’s something that if a buyer worked a waive, the appraisal contingency in, and the $4,000 stuck in my head today if the, if the offer price is 400 and it appraises for three 80 the buyer is potentially on the hook for that $20,000 Delta. So I’ve seen clauses where the buyer up front agrees to pay whatever the Delta is between the purchase price and the appraised value. You know, Rick we’re, we’re in a market with extreme velocity right now. And we don’t yet have the sold comps that will validate some of the prices we’re seeing for the pending properties we will in a few months. But right now we’re at a point in a position of the market where you know, there’s, there’s such great velocity of transactions that it’s making tough, it’s making it tougher to price things that that will work with the appraised values,
Our guest today, Jim Duncan and Matt Hodges, as we talk about the real estate market in our area, a phrase that Jim used earlier was the strongest seller’s market. In 20 years. Let’s take a break. I can talk more.
And the 20 years I’ve in the 20 years, I’ve been practicing
Well, thanks for the for straightening me out on that. Let’s take a break. We’ll be right back, man. Thanks so much for being with us today. On another Sunday on the wake up call our guest Jim Duncan met Hodges, as you talk about Charlottesville area, real estate market gentlemen, if it’s one of the strongest sellers markets in Jim’s 20 years of being in the business, and certainly in a significant amount of time here, there are homes being sold at some of their highest rates we’ve seen in a while, many more buyers than sellers. I would assume bidding Wars, is there some sort of recipe for disaster that must be watched out for
So Rick, we see often a, I don’t want to say desperation, but there’s certainly an anxiousness about buyers right now, and realtors as well where a property comes in the market, it fits the needs for their client, but they know it’s going to be in high demand. And so the realtor’s conversations
Are okay, how can we get to the front of the line? Let’s do a quick closing, let’s do a cash contract. Let’s waive the need for an appraisal. Let’s put in an escalation clause. Let’s do a quick commitment date in the contract. Those all can put stresses throughout the process. There are so many professionals that touch a transaction from start to finish that it it becomes a situation where there’s going to be upset feelings. There’s going to be expectations that are dashed so recently. And this is under contract right now in another city, but recently a realtor asked me for a three-week closing. And I said, no, I, you know, I’m, I’m not going to be a party to that. You can use another lender if you wish, but I know that it’s not going to close within that timeframe because there’s an inspection period of time.
There’s just the simple processing and underwriting and closing of the loan. There’s so many pieces that it just wasn’t a fair situation to put any of the, the participants or because there would be expectations that were dashed. So I just said, frankly, no, this is the timeframe that we need to do with them. And they agreed. It was it was just sort of holding your ground in the in the bigger scheme of things, when you’re concerned about all of the noise around you, all the other buyers, all of the thoughts that you’re putting into the sellers had, or that you’re trying to position yourself to think like the seller you’ve got to sometimes just step back and say, no, this is what we can do. This is our highest and best scenario. And as Jim said, in the previous segment, they have to be prepared to either win or lose at that price. It has to feel right and did recipe for disaster. The other things that are included in there can just spoil the whole process for so many people in the, in the industry that it’s, it’s just not fair to do. So we try to guard from doing everything fast, fast, fast, and waving protections for our clients.
It seems like if you go searching for a home or whatever platform, software platform, you choose to use homes, don’t sit very long, but sometimes you see homes that have been on the market for weeks. Jim, is there, is there something that identifies a house that has been sitting on the market for many weeks? Is it, is it overpriced? Is it is it, does it have a structural flaw that the seller won’t use? I mean, what is it when homes are selling within two days of being on the market? Why is there something sitting there for, for 12 weeks, for 20 weeks, et cetera?
It depends. I think that it’s, you know it’s, it’s hard to say that, you know, if a property’s been in the market for more than three weeks and I’m looking at some houses in the city right now, I pulled the pendings in the city new construction excluded the median days on market is six, which is crazy. But, but it goes from zero days on the market to 913. You know, so I think that there’s, you know, the, the 32 are under contract under, under 80 days. So what does it say about the other ones? I think, you know, it depends on each one and I think that it could be price. It could be you know, bad neighbors. It could be there’s some damage in the basement where it could be just into a unique house.
That’s not a generic homogenous house that appeals to the second market. It’s my, I’m always very try to be careful when I’m saying that the market is static because for the people out there who are sitting with the houses on the market for three, four, 10, 15 weeks, they’re sitting there saying, why is my house not selling? Hey, you know, it’s, cause it might not be the right house for the market right now. So it’s, you know, ultimately I think that, you know, Rick might, it’s almost always about price. You can put a house that, you know, for $500,000 and it doesn’t sell, and it’s a $300,000 house. Of course it’s not going to sell. So I think that regardless of the market you know, prices, the number, one thing, you know, price and preparation and presentation of this three big things you need to do. But it just, it really does depend on what the market is.
Does does the, as a realtor or Matt, what what someone in your field have anything to do in terms of helping the seller recognize why a home is still sitting on the market for such an extended period of time?
I am, for me it’s, I mean, I give the facts and the, I think that, you know, I was on a couple of years ago, I was in Vegas speaking at a convention and someone said, what’s the hardest thing you do. And, and when you’re talking to a seller and I said, no, tell them telling them their house smells is one of the hardest things. And they said, well, how do you do that? I said, I tell them their house. And it’s not like cats or dogs or smoke or whatever. It’s my role as the professional to be candid and blunt and say, this is a deficiency we need to address whether through remediating the smell or reducing the price by X to solve that problem for the buyers. So, you know, from my perspective as a seller’s agent, my job is to go through with an objective lens.
Oftentimes, you know, bring a stage or, and all that stuff, but helping people understand that there are things that they might love about their home, you know, that nobody else is gonna love. You know, even in this market, we’ve got a hole in the drywall from where your kid, you know, knocked a thing into the drywall a couple of years ago, picks the hole, even though it has sentimental value. You know, so it’s, you have to make sure you have to take the home from being a home and to being a product on the market and look at it like that rather than a place where you’ve raised your two kids and and your dogs,
You wrote an article. I mentioned Jim Duncan, you can go to realcentralva.com and read some of the articles and sign up for regular articles. There’s one called sniffing basements.
Yeah. Yeah. I, I had a client years ago. I do a lot of video for my, my out of area clients. And she remarked how I have a habit of sniffing when I went into the basements. I said, yeah, because it’s an easy way to just certain to discern whether there’s mold or moisture in the basement. I mean, it’s not clear that not you know, I wouldn’t base an inspection on my, on my nose, but if the house, if the basement smells wet is a darn good chance that there’s some moisture infiltration, that’s going to be a challenge. Everybody should have a dehumidifier in the basement. But you know, you fix those things before you go to market. Sounds simple, but for a lot of people, they, you get nosed blind in your own home. And you don’t, you don’t know that the house smells like wet dog because you live there all the time
Jim Duncan with Charlottesville’s Nest Realty and we also have Matt Hodges here with presidential bank mortgage. So gentlemen, we’ve got historically low interest rates. And obviously we have, is that playing a role in why we have so many buyers or are there other issues going on?
Yeah. So Rick, you mentioned one side of it. With low interest rates begets buyers, first time home buyers move up buyers. There’s a desire to get into the marketplace because money is so cheap.
We’re talking about low threes or high twos. That’s, that’s fantastic for, for home buyers buy first interest rate was eight and a quarter. And my realtor remarked that it was blowed 10%. That’s great. You know, it’s, it’s all relative to the times, but because they’re so low, it brings out the buyers, but likewise interest rates are so low and the sellers have a great rate. Do they really want to sell at this point, they’re building up equity. They like their house. Maybe it’s just not the, the right timeframe because it is the house that they want to live in long-term and they do have a fantastic, great it’s, it’s a bit of a double-edged sword because they’re low. We have a challenge with appreciating prices as well because rates are low and houses have appreciated there’s affordability. But if you take one of the two out of that equation where you you have interest rates that are climbing then you’re going to have some issues with affordability. If the house prices don’t continue to inflate it, some percentage, some reasonable number.
Can someone speak to that taxes over the next one or five or 10 years? Is there, I mean, once, once I buy a house at this newly appreciated rate, what’s happening tax wise over this time, period, is there, is there going to be a flattening here? Is it going to go up? Is there thoughts on any sort of downfall or potential bust in the future just by the standard Seesaw, if it goes one way it must come down the other?
Well, I, I wouldn’t speculate on what the future holds regarding assessments and appraised values and sales prices. But you do have appreciation and inflation that you need to concern yourself with wherever you purchase. So in the County it’s been a little more sensitive. The tax rates gone up at least every other year in sometimes every year. And primarily that’s driven on revenues needed for school funding. The city has held their tax rate for a number of years but they raised additional money by increasing the assessments on property. And there is a law about equalization, meaning it can’t be assessed for higher than fair market value, but that is the other route to bring in additional
Tax dollars, either have a higher assessment or a higher tax rate.
Well, and I would, am I wrong to assume that after the past school year past and current, and the difficulty of financial spending that all Morrow County will certainly need more money and their school system and possibly Charlottesville as well?
Yeah, I wouldn’t, I wouldn’t speculate as Matt said, you know, I think that projecting out what what’s going to happen in the next two years, five years, 10 years is hard. I’ve said for years, and I’ll tell you what happens today in 18 months. But with the schools, I mean, I think that that’s, again, it’s, you know, the, the assessed values are contingent on what the actual market value is. So right now they look like they’re gonna, they just went up annual assessment and accounting, the city, they went up a bit rates are the same as is I understand right now, but, you know, from a school’s perspective, I mean, it, it it’s, it’s, you know, we’ll see what happens with the school board budget. And I think that yes, they’re going to need more money as they always do.
There are a lot of capital improvement projects that are needed in the city and the County. But they tend to do to not raise property tax rates solely to accommodate school needs for better or worse. So I think it really does depend on what the, you know, also with the politicians in the budget say with respect to, what’s going to happen with assessments and what’s gonna happen with the tax rates going forward. So it’s, it’s, it’s, it’s a, it’s a hard nut to crack with respect to the school budgets, but you know, 20, 22 is going to be an interesting year. So we come out of the pandemic, hopefully.
Well, we talk about appreciation and assessments because of this strong real estate market. Again, Jim Duncan from Charlottesville nest Realty and Matt Hodges with presidential bank mortgage is the, market’s so strong because there are so many buyers than in years past, or because there are so few sellers then years past.
I knew that was coming. I knew that was going to be the answer. Yeah.
So we’ve got a new wrecking and I know
You’re aware of this with COVID comes portability of jobs. Buyers don’t have to work for their company here in Charlottesville. It’s not a prerequisite at all.
What is, is being able to log in and have a reliable, reasonable internet connection and to have access to an airport. That’s what it takes. And because Charlottesville is such a desirable place to live, people are flocking here because they can, because their employers said, sure, no problem. And I’m seeing it on a regular basis with big name tech companies from California that, you know, well those people are moving here because they can do so they’re moving here from New York because they can, they’re moving here from Northern Virginia because they can, and guess what those three places have that we don’t, they have high cost housing. And so people coming from those three areas are used to paying higher prices. And that is exasperating the situation here, in my opinion, now it’s anecdotal, but I’ve seen it happen.
So is this trend and I’ll put quotes around it bad, and we gotta take a break soon so we can continue the conversation, but is this a bad trend?
I mean, I, you know, Rick, I don’t, I don’t know whether that matters, whether it’s good or bad, I think it’s going to happen. And you’re seeing, we’ll come back to this now that you’re seeing that, that companies large and small are reevaluating their usage of their, of their space and their office space. And you know, that’s gonna impact not just how and where people live and work, but also society as a whole. So I think it’s you know, it doesn’t matter if it’s good or bad, it’s something we’re gonna, this is going to change our society and our culture for forever.
All right, let’s take our next break. And we’ll come back and continue talking about the real estate market with today’s guests, Matt Hodges, and Jim Duncan hang tight. And here we are, again, talking about the local real estate market with our guests, Jim Duncan, Matt Hodges, gentlemen, we were talking about the influx of new citizens to our central Virginia area coming from other areas around the United States. And Matt, you said that they needed two key things access to the internet and a local airport, but it’s been said that of Morrow County. And I know this just from my own family. My wife works for Albemarle County public school system and the number of people in Albemarle County who do not have access to the internet.
So it seems as though if you are moving to central Virginia and trying to live in Albemarle County, are you not cutting off a percentage of your options when looking for a home, do you need to look elsewhere as well?
I mean, from my perspective, I’ve got clients who are, you know, a couple of clients who are evaluating Nelson County and even parts of Louisa because over at Moore County, because for these folks you know, more of my class now or are choosing to not have kids and they have know they have their pets when the school system is less of a factor and the internet, internet availability is the critical factor. And I bought County has been, you know, you know, go ahead and say negligent and their rollout of broadband and approval. What have you, where Nelson with the, the partnership with Seebeck since Virginia electric and Firefly are offering fiber broadband throughout the County. And they’re doing that in Louisa, I think, parts of a full ban as well. Now if you don’t have internet, you can’t work at home.
And the pandemic is forcing almost everybody to work at home and that’s, it, that’s a shift that’s not going to change. People are realizing they can work at home and don’t need massive amounts of office space. You know, and for me, I have a survey, I use it with my buyers and one of the questions is, is internet. You know, do you need internet more to alert my incoming buyers that, you know, they’re from San Francisco or Seattle or Portland or DC and internet is ubiquitous there. I want to, I want you to alert them that that’s not the case here. And there’s no great way to search by internet availability. But you know, we got 99.8% of the time. Your home is going to be not even devalued, but almost on sellable to the breadth of the market, if you don’t have internet access.
So Jim, you mentioned Nelson County putting in a fiber broadband system with Firefly and and I guess it’s government or the electric co-op down there. I’m curious how, how they make that happen. And I don’t know if you know, the answer I’ll grow. County’s a huge County. I think I looked it up 720,000 square feet, but Nelson is 470,000 square feet. So two-thirds
Right? Square mile, sorry, sorry. Sorry. My bad notes. Okay. But now it’s in County seems to have a lot more a lot more mountainous area. How do you make that happen in one area and not in the other?
I mean, the, the best answer is you know, from, well, two, one, I don’t care. Yeah. My clients care that we have internet. But the mechanics of how it gets done are irrelevant. But I think that that’s a question that I would say the answer is probably in large part political and economic will clearly it can be done. They have, the, those folks have said, this is a service we’re going to offer. And they’re, and they’re, they’re executing it. I think there’s also feedback there that’s you know, from, from my client’s lens, I mean, it’s a fantastic company. That’s part of the community, they’re looking to do something that is good for the community, but is also profitable. So I think it’s something that [inaudible] County, you know what, I think we have five power providers throughout the County but th the main one has not know gone on this sort of tangent, if you will. So I think it’s something that it’s just a different thing. The localities in the, in the economic and political will,
Do you think that the expectation that remote work will fade away or pass and coming years and the housing market will turn in another direction?
I mean, I don’t think so. Yeah, I, I think, again, I think there’ll be a same commercial real estate is, is something that people are looking at. Big and small companies are, are evaluating where they need X amount of square footage when people are perfectly happy and productive working at home. You know, if I had to guess right now in five years, more people would be at work than they are today, but not the percentage or the number of people who are, who are working two years ago.
What role does virtual education play in the real estate market? And I don’t, I’m not strictly talking about internet access here, because that seems to be tied in tightly to working from home. But does it play a role in, in the decisions that the university of Virginia might make or has made if you have, if you live near the university or you own a rental properties in that UVA students might have used in past years, but now the university is going more virtual might you be selling those instead, or because that sort of, that sort of pathway in my thinking,
I hope they sell, we need more inventory yeah, functional loss. So in those homes, I wouldn’t need to, there’s, there’s a lot of functional obsolescence in those homes, those group homes, if you will that are chopped up and have locks on doors and separate eating areas and multiple kitchens, it could be a challenge to retrofit it into a single family residence to sell later on. Okay,
Yeah. I think it’s Rick, you know, it’s way too early to, to, to, to guess what’s going to happen with higher and higher education. You know, I think that there’s a lot of arguments out there that says, you know, if you can get you know, education that is just, you know, from a less expensive university, as you can, from an expensive university virtually, why would you spend 80 grand a year to go to a certain certain university? I think, I mean, I think that’s a whole nother conversation as far as the, the impact of the pandemic on higher education, real estate, all that stuff. I think that one thing that we’ve seen with, with the pandemic right now is, and it’s hard to answer, you know, but right now we’re seeing the use using, we used to see a seasonality in the market in Charlottesville, where a January, January, February the ramp up time for for market and the inventory, it would taper off in June, July typically. Right now we have so many dynamics that have shifted from the loss of the market in 2020 to the lack of the school year, if you will that the seasonality has been
Flattened to a large degree
Has the rental market been affected in any way?
I mean, what I’m seeing more people are paying higher prices for rent. Again, it’s supply and demand. More people want to be in the shelter area. Then we got housing for we have and it’s not just himself. So we have a, we have a housing crisis in our country where prices are going way higher than people can afford across the broad spectrum in the market, in the mid to upper echelon, you know, for lack of a better term, fine, but Broadway prices are crazy high for a lot of, for a lot of my clients. And it’s it’s a different, difficult and challenging market for many.
I’m curious, you know, we, we’ve sort of skimmed around and over how the COVID pandemic has played a role or affected some bits and pieces here, but I’m curious how, how a borrower might be affected and how a realtor would even show a house. I mean, you see things virtually, but I’m curious as to how that might affect things, but Matt, let’s start with you on, on how someone who’s self employed specifically might be affected during these times of making a home purchase.
Yeah, it’s it’s a great point because we’ve dealt with it starting at about April and all the way through today, and we’re still dealing with it. Self-Employed borrowers typically have been treated differently than salary W2 employers, employees in that we need to see 1040s. We need to see a business returns if they’ve got a separate return. Okay. No big deal. You know, we need to prove that they can afford the house. But it’s ramped up both Fannie Mae and Freddie Mac have required now that we look at P and L statements all the way through since the last time they filed. So for many home buyer or many self-employed borrowers, they last filed in April of 2020, or even as late as July of 2020 for the year 2019, which means that right now I need a profit and loss statement, a P and L for all of the year, 2020 and all of January.
And since they’re not going to be closing until April, I knew that for January, February, and March. So I need 15 months of profit and loss statements from this client. And I need to see three months of bank statements to show that there’s been revenues coming in. And then we have to do these crazy math calculations to see if the revenue has stabilized since COVID hit to see not necessarily that the profit is there as much, but, but to see that the the dollars are coming back into the business. And, you know, you question how far this goes, because in my estimation, the small businesses, especially here locally are huge drivers of employment. There’s there’s so many companies that fit that under 500 person business that it seems like we’re overburdening them with requirements.
Is there, is there anything to do about it or is it just the rule that must be followed until something changes?
That is exactly correct? It is the rule that we must follow. We don’t have a choice. We’ve got to make a top her on some employed bars because Fannie Mae and Freddie Mac said, so with salary employees, we can see a little bit more clearly, I guess. So UVA had a furlough for a month. During 2020, it was a one-time occurrence. We got assurances Mubea that it was over and that’s all it was. We could still use somebody who’s full salary. But because self-employed seemed to have been hit a little bit harder, their revenues and their profits were a little bit more in jeopardy. We had to do additional tests on their their income.
And Jim, do you, does this come into effect when you show a home to someone? I mean, how nosy does the realtor get into someone’s income? What their job is?
Not when I started many years ago, I would do the prequalification. I would qualify them. I got mortgage calculator on stuff. But now it’s just, yeah, I up send them to local, to a local lender who says they’re good, where there there’s so many things that they have to provide to the lender, to the underwriting process and all that stuff. That’s not my world. My, my world, my clients is saying these people are really good at what they do, and they will take care of you. And they will tell us all, if you’re qualified to go to, to have this conversation they start the process really early in our home search process. But you know, I don’t, I don’t have a need to, or frankly, desire to know, you know,
Frankly what their income is or the debt to income ratio, isn’t et cetera. I just need to know, does the lender say they’re qualified in doing, do I trust the lender and Rick, from our perspective, if they’re, self-employed, I’m collecting their tax return, I’m analyzing it. I am not trusting what they say, because I’m not going to write a pre-call letter that I can’t back up. Right.
We have about a minute and a half left. Gentlemen. I’m curious, it’s winter time. Doesn’t really make a difference. Whether it’s winter or summer. One of the things I enjoy most about the house I live in is we have solar panels and solar backup. What are your thoughts on that in our community?
I mean, I think it’s great. I think more people, as many people should do solar as possible. I think we’re starting to see is being reflected in property values. I think the one key thing is to know whether you’re a buyer or seller to know if the system is leased or purchased. I’ve heard of people going to closing and the seller didn’t realize they still owed 15 grand on that. And their solar package. They have to pay off at closing. That’s created some hiccups if you will. But no, I think it’s, you know, if you can do it, why wouldn’t you do solar? It’s just, it’s a no brainer
And I’m not talking about it in the sense of help save the environment. I’m talking about it in the sense of our power goes out and the solar backup kicked on,
I guess for me, I mean, it’s, I said many, many years ago and people are not going to, again, broad brush people are not going to go green unless they’re saving green. You know, I think it’s if you can say here, if you can save money by doing solar and being off the grid as much as possible yeah. Go for it. You know, ROI is, you know, it’s, it’s not, you know, not one-to-one immediately, but if you’re going to be there for, for, you know, X number of years and the clients should do the math with the solar company it makes a ton of sense to, to not just save money through the power output, but also say, you know, help to save the environment.
All right, gentlemen, again, our guests today, Matt Hodges, he’s the Charlottesville branch manager at presidential bank mortgage and Jim Duncan. He’s a broker partner at the Charlottesville nest Realty. Thank you so much for taking the time to be with us.
Thanks Rick. Thanks Rick. Have a good morning.
You know, we’ll have you back in a few months because the market will change once again, next week, we’ll be talking about we’ll be talking about grief for yourself, your family, or your friends, certainly things everyone needs to know. Take care, everyone.
Speaker 1 (56:26):
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