Why your Realtor may be the biggest threat to you….

When I first obtained my real estate license in 2007 the real estate market was a very interesting place. The real estate market was teetering on the verge of collapse after a decade of record year over year gains in almost every market in the country.  If you had asked someone on the street if they knew a Realtor chances are they were one or someone standing right next to them was. Once the market crashed one of the best things happened to the real estate business; lots of real estate brokers got out. Many of these brokers were part time and couldn’t put enough deals together to pay their license dues let alone make a living. They went back to whatever jobs (or hobbies for the part time folks) they held before real estate boomed. The days of sitting one open house and picking up 5 new buyers were over. Reality quickly sunk in.

In recent years we’ve seen a resurgence in the housing market throughout the country; some markets stronger than others. We’ve also seen a resurgence in new real estate brokers. Shows such as Million Dollar Listing not only make the business look easy and lucrative, but they make it look “cool.” It has never been so “cool” to call yourself a broker. Everyone wants to pull up to lunch in a new Range Rover to meet a client. Sit outside on a Wednesday afternoon, sip a martini, and discuss the real estate market with a potential client. Who wouldn’t want to do that? Not only do I want to do that, I actually do it. I’ll also be frank. This business is relatively easy and lucrative. It has it’s fair amount of stress but that is what two martini lunches and happy hours are for. But at the end of the day there is a threat to our industry, to the real estate market, and to you the homeowner; that threat is some of us. Real estate brokers. The only reason why some of us may call the business “easy” is because we know what we’re doing.

Too easy to get licensed…

The barrier to entry into the real estate business is quite minimal. You take a class, you take a test, you pay some fees, and you’re in. Actually being successful in the business takes much more work but being good not in terms of sales volume, but in terms of protecting and advising your clients, takes experience, knowledge, and the ability to understand market forces that most people don’t possess.

I’ve seen countless people on social media dive into the real estate business. They then spend money on on-line advertising, magazine ads, and even someone to manage their social media profiles. They’ll start posting articles such as “What Today’s Fed Actions Mean for the Mortgage Market” but if you asked them what it meant they’d stare at you like a deer in the headlights. When you ask them about the real estate market they’ll quote something our association has sent out as a talking point “Next year Chicago is projected to be up 3%” but when you ask them specifically about the two bedroom luxury condo market in the Gold Coast you might get that deer in the headlights look again. They’ll talk up the real estate market to you and tell you why now is a wonderful time to buy, despite the fact they may not know what area you’d even be interested in buying in. Every day they’ll post photos of a new property they visited on a brokers open talking about how wonderful it is and how it is “gorgeous, stunning, amazing location” even though it might be on a desolate street bordering an industrial complex. These people are a threat to you.

You might be thinking these agents can’t survive in this business. They won’t make enough to sustain themselves and they’ll die out and move on to other things. But let me ask you this, how many people do you know who have bought homes actually interviewed their buyers agent? Conversely, how many people who have listed their homes for sale interviewed multiple agents? Why do people insist on interviewing listing brokers when they’ve already acquired the asset and the sales price is essentially set by the market, yet when it comes time to acquire an asset (their home) they’ll let almost anyone help them? After all, as the old saying goes,  you don’t make money when you sell, you make it when you buy.

So why do I mention all this and take the time to write about it? Am I against new brokers? Absolutely not. We all have to start somewhere. As a matter of fact part of my day to day job is training new brokers and mentoring existing ones. What I am against is stupidity. I’m not going to sugar coat it. I’m against people who quite frankly do not have any business being in my business. I’m not saying this because I’m afraid they’ll take business away from me personally. I’m saying this because their stupidity and apathy hurts you, the consumer which in turn tarnishes the Realtor brand and what we stand for and believe in.

As a broker it is our responsibility to educate ourselves to the fullest to protect our clients. It is our responsibility to be honest with our clients and not repeat sound bites we’ve heard only to make ourselves appear much more educated than we really are. Some of the clients we deal with are wealthy and their home is a small asset to them. However, most we work with, their home is their largest asset. It will be the largest purchase they make in their lifetime. The money they make from their home (or lose) may determine what age they retire, what college they can afford for their children….or bigger yet, how much stress they’ll have in their lives. We cannot control market forces, but we can do our best to educate our clients to help them make the best decision with the information available. That is what we’re here to do. That is our obligation above all else.

So if you’re in the market to buy or sell, or even to rent, be sure to work with someone who knows what they’re doing. A new agent may be a completely fine person to work with, but make sure they have the backing of a team or a partner with experience. Make sure they’re committed to their job, to understanding the market, and understanding economic forces in general. If you’re looking to buy a new home, interview multiple brokers just as if you were interviewing someone to sell your home. Because at the end of the day how you buy your home today will determine how good of an investment it really is.



Will mortgage rates rise because the fed raised the federal funds rate? If you’re speaking to a real estate broker who is completely inept when it comes to the bond market, then their answer will likely be a resounding YES! However, the true answer is much more complicated than that. The truth of the matter is that the “fed funds rate” that the FOMC (Federal Open Market Committee) influences actually has very little affect on mortgage rates and they are most definitely NOT directly correlated.

I will try to keep this as simple as possible, since this material can definitely get quite dry,  but it is important to understand a few basics. The “federal funds rate” is simply the overnight rate that banks charge each other. Why do banks do this? Well, the law says that each bank must keep a certain percentage of deposits on reserve at all times. Obviously each bank wants to put their money to use so they try to keep their reserve deposits to the absolute minimum. Well, at the end of each day some banks may be a bit short and some may have excess reserves. The bank with excess reserves will simply lend “overnight” to the bank with a reserve shortfall. The fed funds rate is essentially the “overnight rate.”

There are some interest rates that consumers experience that are directly correlated with the fed funds rate but these are typically the shortest term loans / credit. For instance credit card interest rates for instance are typically tied the “prime rate” which typically hovers a few percentage points above the fed funds rate. These are considered short term loans. Car loans typically range from 3 to 6 years and therefore can be exposed to greater influence by the fed funds rate.

But what about mortgage rates? If you really want to follow mortgage rates then you need to follow the bond market. The bond market is an interesting animal and while it may react in the short term to a fed funds hike the bond market is much more interested in what the fed has to SAY versus what they do. Mortgage rates are tied to what bond investors need, versus what the fed’s target rate is. Let me give you an example and I’ll thank Bankrate.com for providing the following information in such a simple manner. “Starting in June 2004, the Fed raised the federal funds rate 17 times in two years. And what happened at first? Mortgage rates fell during the summer and fall of 2004. Back then, the Fed’s rate hikes caused investors to become less concerned about inflation, so mortgage rates fell.”

Now, let us think back to 2017. In 2017 we had three fed rate hikes, but what happened? Rates remained relatively flat. It wasn’t until the start of this year that we saw an increase.

What does all this mean? Am I saying that rates are not going to go up? No, I am not saying that. All I am saying is that there is not a direct correlation between the fed funds rate and mortgage rates. The answer is a bit more complicated than that. The fed may exert some influence over mortgage rates, but that influence can work in either direction!

The reasoning for writing this blog post is because when I opened my Facebook app this evening I saw almost a dozen posts from fellow real estate brokers shouting about how the time is NOW to buy because rates will SPIKE! Some even called for 7% interest rates by the end of the year! To those consumers reading this, I apologize on behalf of these brokers for they do not know what they are talking about and are only using fear mongering in order to obtain your business. That is wrong.

To my fellow real estate brokers posting that the FOMCs decision today will immediately hike mortgage rates, I implore you to educate yourself on how the bond markets work. You look stupid and do a disservice to your clients and your industry with your blatant ignorance. As real estate brokers it is our responsibility to properly understand market dynamics and inform our clients with such knowledge so they can make an informed decision. Anything less is the equivalent of malpractice.

Paul Blackburn is an Illinois licensed Real Estate Broker and Realtor with @properties in Chicago, IL. He can be reached anytime via e-mail at Paul@PKBlackburn.com

To learn more about FOMC and Mortgage rates here are a couple helpful links.

Bankrate.Com’s 7 Ways A Federal Reserve Decision On Interest Rates Affects You

The Mortgage Reports: How Mortgage Rates Connect to the Fed Funds Rate

Why you should be careful when Realtors give you stats about the market…

A few weeks ago on a Sunday morning I woke up and went about my morning routine. I made some coffee, grabbed my laptop, and crawled into bed and turned on the news. On the news this morning was a segment with two real estate agents speaking about the 2018 real estate market in the Chicagoland area and what we can expect the market to look like throughout the year. Naturally I was curious if their views would align with mine so I made sure to put aside my laptop and phone when the segment began to give it my full attention.

The talking points were the usual talking points you’ve probably seen on social media recently “Inventory is low” “The market is hot!” “Prices are up 5 to 7% year over year” “We are still far from peak prices during the boom. The market has more room to grow”

It was those last two statements that made my head hurt and quite frankly embarrassed to call myself a Realtor. What was upsetting was not the fact that the brokers were stating these “stats” but they were using them as justification for why now is a wonderful time to buy and why you should buy instead of rent.

I’m sure many of you are friends with multiple brokers on social media. If you’re reading this chances are you follow me as well. Being in the industry I follow many, probably near a hundred in total. After hearing the above statements on the news it also had me thinking about the amount of times I’ve seen other brokers make these statements on Facebook, Instagram and the like. Sharing of articles from random real estate groups, posting outlooks from brokerages, posting random statistics that make you feel like you’ve lost out on an opportunity so you better jump into the market now. All these statistics, while factual, are being distorted and not explained properly. There is a difference between a broker being a salesman (or saleswoman) and being your consultant. A good broker is not in sales, but instead is in consulting. They are there to guide and advise you. Once your home is listed for sale, then they turn into a salesman on your behalf. So without further delay let me quickly explain why I despise fellow brokers who spew the last two stats as justification for buying that I saw on the news.

The Chicago market is up 5 to 7% year over year.”

First off I would have loved to have known where this information was gathered. Lets ignore the fact that there is a 40% variance in the above range, but lets talk about the word market.  What market is up 5 to 7%? Chicago market? OK….where in Chicago? Gold Coast? Lincoln Park? Englewood? Roseland? What types of properties…Single Family homes, Condos…Two flats? What about land? What about new construction condos? Is this year over year average / median price data derived from total sales or are we only comparing exactly like units such as taking a sampling of the same buildings, same blocks, etc in certain areas? Now I know what you’re thinking…Paul this data is only meant to give you an idea of the market trajectory. I would agree with you. But if you’re making a large investment in a condo in the Gold Coast, wouldn’t you want stats that specifically focus on what you’re buying? Wouldn’t you like to know that market times and prices for higher end 1 bedrooms for instance is actually down year over year versus two bedrooms? And if we are going to talk about the entire Chicago market being up or down…shouldn’t you have a specific number? Why such a wide range?

“We are still far from peak prices of the 2006/2007 market. The market has much more room to grow”

This literally made me nauseous; I could feel my morning coffee start to come up as I listened to this comment. Why? Because it’s generalized statements like this made by either 1) Completely ignorant and stupid people in my industry or 2) People who are purposely trying to deceive consumers (I’m not sure which is worse) which is what contributed to the real estate bubble and crash we saw a decade ago.

The blanket statement is right, over the entire Chicagoland area we are not near the peaks of 2006/2007. However, in many areas and buildings we are BEYOND the peaks of those years. This “data” is contrived by looking at the entire area. During the peaks areas on the south and west side of Chicago along with a handful of suburbs were rampant with fraud. I saw it first hand. Burned out three-flats selling for $300k two days after selling for $200k. This propped up pricing in many low income areas of the city. What are these properties doing today? They’re less than 50 to 75% of those prices. We also need to factor in other areas that saw massive spikes due to random “investors” buying that drove up prices. These areas will take well over another decade and in some cases multiple decades to return to 2006 numbers.

Many areas of the city are at the peak or above the peaks. There is nothing wrong with this. Many areas are seeing tremendous growth and for very good reason. There are multiple areas that I believe will continue to grow very well and will be excellent investments. But I’m sorry, the continued spread of “we’re still far from 2006/7 peaks” is by far the worst data you could use as a reason to buy. The Chicago market is highly localized. It is localized down to neighborhood, down to certain blocks in that neighborhood and even certain buildings.

What data should you look at and listen to?

First off, find yourself a broker that you trust and that when you talk to them they have some basic understanding of the Chicago market as a whole. If they start spewing some of the generalized stats above of why it’s a great time to buy…run! Run like Forest Gump or like you just saw a clown in the woods in the middle of the night. Find yourself someone who is not going to sell you. Find someone who is going to listen to you and truly wants what is best for you. Find someone who truly understands the market place.

Your Realtor should be able to sit down with you and explain the market stats in the areas you’re looking and in the price point / size range you’re looking in. There is nothing wrong with buying a home that is selling for more than it did last year or selling for more than it did during the boom. But you want to make sure you have all the information so you can make a truly informed decision. Avoid generalizations that some brokers give you. Avoid generalizations that websites such as Zillow and Trulia give you. Get down to specifics and focus. You’re about to make a massive investment don’t you owe it to yourself to work with someone who is not only intelligent about the market place but also has your best interests at heart?





Since the passage of the new tax bill for 2018 I have had a handful of clients reach out to me concerned about how the market here in Chicago will be affected by the new tax laws, specifically the tax laws pertaining to home ownership. In the months running up to the new tax bill you may have seen posts on social media or even received e-mails from Realtor friends and the National Association of Realtors (plus local associations) speaking of the detriments of the 2018 tax bill. I thought this would be a good time to have a quick, clear, and honest write up about my personal thoughts on how the tax bill will affect the Chicago real estate market. Please note that I am not an accountant or a tax attorney and you should ALWAYS seek professional advice when it comes to any tax obligation or deduction.

I can only speak to how the tax bill will affect the Chicago market, specifically the downtown, near west, near north, and north side markets. These are the areas I specialize in and the areas where I have the most intimate knowledge of the market and the mindset of the homeowners, buyers, sellers, and renters.

First let us quickly outline the changes in the 2018 tax bill as it pertains to home ownership.

Mortgage Deduction Changes

For NEW home purchases the limit on deducting interest on a mortgage has changed from a mortgage value of $1 million to $750,000. Homeowners with existing mortgages over $750,000 up to $1 million can still deduct their interest up to $1 million. Furthermore, those homeowners can refinance and still deduct interest up to the old $1 million provided that the new mortgage is not greater than the refinance amount. The above holds true for 1st and 2nd homes.

The 2nd home interest deduction is NOT going away. First proposals of the bill had this provision but they were removed. If you are looking to purchase a second home the mortgage deduction may still apply to you provided that the combined amount of the mortgages on your 1st and 2nd home does not exceed $750,000. If you already own two homes with mortgages then you’re grandfathered in up to the old $1 million amount.

Home Equity Loan interest is no longer tax deductible. Previously this was deductible for a home equity loan / line of credit up to $100,000 in value. This is going away for both new AND existing home owners. HOWEVER, the interest of a home equity loan MAY still be tax deductible if the proceeds are used to “substantially” improve the home.

Property Tax Deduction 

The new bill limits state and local municipality tax deduction to a maximum of $10,000 per year. This is what concerned most people because it is not just your property taxes, but a combination of your property taxes AND state income taxes that you pay. No one is grandfathered into this tax law change. Previously this deduction was unlimited.


So as it pertains to real estate the above is a list of the most notable changes to the tax code for 2018. So the question on everyone’s mind in the real estate industry is how will the new tax plan affect home values.

The interest deduction changes do not concern me in the least. They grandfather in current homeowners and they still allow for a healthy deduction of up to $750k and they still include second homes. Our current market is fueled by primary home buyers. It is not fueled by investors like it was over a decade ago. We’re not seeing a bunch of condos going up targeting second home buyers that would push then over the $750k limit.

What does give me some pause for concern is the limit on state and local tax deductions of $10k, specifically because this is a TOTAL amount of tax which includes your state income tax as well.

The $10k limit will apply some slight downward pressure on the housing market, there is  no denying that. Limiting the amount of tax deduction, even if the overall bill ends up a net positive for your pocketbook, in theory does lessen the “reason” to purchase a home.

Will this downward pressure be enough to change home values in Chicago? No, I do not believe so. Keep in mind I’m discussing the markets I work in. I’m not talking about south suburbs, etc. I am talking about downtown Chicago, the north side, the west loop, etc. It has been my experience that those who own in these areas own because they believe in the neighborhoods and they love the neighborhoods. They have children in school and would not uproot them to save some money. More importantly, I don’t see many of these home owners and would be home buyers in a financial position where they would be drastically hurt by the $10k limit on state / local tax deduction.

With the above being said I do believe there are a couple other factors that we should discuss that could bring the property tax deduction into play. By itself I do not believe it is enough to move the market at all. However, I want to discuss two other items.

Multi-Family Overbuild 

We’re seeing a TREMENDOUS amount of building in Chicago of new luxury apartment buildings. In the past year we’ve seen occupancy rates decrease overall in class A luxury apartment buildings. Newer buildings are offering even more concessions and we will see these continue into the spring market as more buildings come on line and even more in 2019. With these concessions in BRAND NEW luxury buildings it is just one more obstacle to get first time home buyers to purchase as long as they don’t need to (having children for example might create a “need”). If they’re single or a couple with no plans for children the rent concessions of these beautiful buildings does provide downward pressure on the housing market. These are typically well to do individuals who pay a large amount of state tax and would be looking at homes, even if a one bedroom that have healthy property tax bills.

At the end of the day, I do not believe we will see any major market shifts across the board because of this. We may see it in certain areas of the market, One Beds priced from 400 to 550k for instance in the downtown market. But for the overall market I do not see much of an effect in Chicago. However, it is something to watch.

Fear Mongering 

Leading up to the passage of this bill and the many versions of it those in the Real Estate industry were posting on social media left and right about how you need to call your congressmen and congresswomen and urge them to vote down this bill. Posts would read “This will lower property values by over 10%” and the like. The National Association of Realtors and the Illinois Association sent me countless e-mails urging me to “take action!”

As much as I appreciate those in our industry looking out for the best interest of our clients and my profession, we sometimes do more harm then good. Think back to the crash. Enough said.

If this fear mongering continues it can be enough to unintentionally scare the market. It was posts like this which lead some of my clients to reach out to me worried. Most of these posts didn’t explain all the changes to the bill. When they did explain the changes they did so in a slanted way. I’m not trying to advocate for this bill, instead I’m just trying to give information and let cooler heads prevail. Frantic social media posting without giving consumers substance does no good and only confuses and panics people. What happens to markets when people are confused and panic?

In Summary…. 

At the end of the day the only way we will know how the market will adjust will be to watch it. From talking with clients and those in the industry, I do not see the Chicago market decreasing in home values. Our inventory is low. Buyers in recent years have been extremely well qualified and continue to be very well qualified. Those who want to buy are not changing their minds. Sure those on the fence may have some pause, but I don’t believe the tax bill will be enough to push them off the fence. If anything it will be other factors that may do so.


Paul Blackburn is an Illinois licensed Real Estate broker and Realtor with @properties in Chicago. He can be reached at Paul@PKBlackburn.com 

Why Rent Control Would Hurt Chicago

As some of you may have read Rep. Will Guzzardi, D-39th, has sponsored a bill that would remove the Illinois ban on local municipalities instituting rental control laws. While this removal would not put rent control into place it is a slippery slope that may lead to city councils, specifically the Chicago city council, passing rent control laws. While I do believe Mr. Guzzardi is trying to look out for his constituents, I do believe his logic and understanding of basic economics is flawed. I try to avoid political debates or political opinions in my blog, however, I do not look at this as political but instead as economical. I think it is important that rent control and its disastrous outcomes are explained.

First, let us quickly discuss what rent control is. Rent control is when the government puts a max price (a price “ceiling” if you will) on what a landlord can charge tenants. There are various ways in which this is implemented. Now it is important to note that rent controls must cap price levels below the prevailing market in order for them to have any effect. Otherwise, the cap would never be reached and the rent control law would be pointless. Therefore, rent control sets a rate of rent below the current market level. In Chicago, as with most areas where rent control is a topic of discussion, the goal that is looking to be achieved is to allow low income and middle income residents to stay in neighborhoods and not get “priced out.”

When rent control is in place prices are capped at below the prevailing market and several things happen.

  1. Landlords stop investing in their properties. They do so because they have less cash to invest but also because they will not see increased returns. Therefore conditions of properties deteriorate. I do not mean that they become inhabitable, but the overall the conditions of items that are not 100% essential end up deteriorating and therefore hurting the value of the property.
  2. New investment becomes less. If rents are capped below market value then there is little to no incentive for new rental units to be built. Therefore, supply does not increase. In a normal market, rents increase and therefore profits for landlords increase which entice new investment. The increased supply then helps balance the market.
  3. Existing tenants do not move. Tenants enjoying rent control have little to no reason to move out of their current place. Therefore, only those lucky few take advantage of rent control. The on the market supply shrinks. Because of this, landlords can become very picky. Since they can’t raise rents they might as well be as strict as possible and since supply has decreased they will have countless of applications. High credit scores and higher income requirements will become the new norm. Therefore those with less than perfect credit will be left in the cold.

We will also see a spillover in other neighborhoods that do not have rent control. The excess demand that typically would have been satisfied by increased supply in rent control neighborhoods will not move to other neighborhoods. However, these neighborhoods that do not have rent controls will still likely see less supply. After all, rental developers are not stupid. They know rent restrictions may be placed on them too so they in turn will have less an incentive to invest and therefore supply would become restricted in these markets as well. Therefore, since these markets are unrestricted we can expect to see rent increases greater than normal in these areas and in turn making these areas less affordable.

The reason why any price is exists is due to a supply and demand relationship. When the government tries to “cap pricing” what they end up doing is inadvertently lessening supply while demand remains the same. Therefore, those properties not affected by the rent control will increase dramatically in value. Both NYC and San Francisco have forms of rent control.

We would also see a black market exist among landlords and tenants. “Key money” is common in New York and other areas with rent control. Tenants will pay additional move in fees up front in order to help increase the overall effective rent. Tenants who no longer want to live in an a building or neighborhood, but do not want to give up their amazing rent control place will end up subletting their place. The market will always try to return to normal It is like putting up a damn. You may stop the river in one space, but somewhere else it will flood. The one thing that will not change however, will be a lack of supply as investors will not want to invest in real estate when they are dictated by the government what rents they can charge.

With landlords with less cash there will be less money to pay taxes with. There will be less money to make improvements with thus tradesmen will suffer. The upper middle class market will suffer as well as we will see a spillover into these rentals too as I mentioned before. Rents for those making good six figured salaries will increase. Don’t care about them you say? Well, they will have less money to eat out thus bartenders and waiters will make less tips. They won’t shop at that new mom and pop boutique down the road so that store may close. That cleaning person that came every week? Well, now they’ll cut that out of their budget. The worst part about all this is it will not be due to the free market system, instead it will be due to the disruption of the free market system.

According to the Library of Economics and Liberty, 94% of economists believe rent control not only does not work but is a terrible idea. The agreement cuts across political parties and economists such as Milton Friedman and Friedrich Hayek (who are on the “right”) agree with Nobel laureate Gunnar Myrdal (who is on the “left”). Myrdal stated “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.” I could not agree more. According to Crain’s Chicago Business the executive director of the Metropolitan Tenants Organization wrote ” One in five Chicago renters pays more than half their household income on rent.” Instead of fix the systemic issue that we have 1 in 5 renters paying half their income towards rent, politicians think the solution is to pass rent control? Why? Because fixing the systemic issues takes time, planning, and thought. It does not happen in one election cycle. So instead, politicians with zero understanding of basic economics, or worse their indifference to basic economics, try to move forward legislation that sells a dream to their constituents that will simply never be realized.




Trump Repeals FHA Premium Reduction – Here are the FACTS

If you’ve opened up CNBC or checked your Facebook wall, you may have seen articles and messages about President Trump repealing the reduction in FHA premiums. While some articles simply explained this fact, most articles have been presented in such a way that you might think anyone getting a FHA mortgage is left out in the cold. One of my agents even called me worried about how this might affect her client who is getting ready to close with an FHA loan. In order to put the speculation and worry to rest I thought I’d write a short blog explaining what happened with regard to President Trump and the FHA mortgage premium.

First let me give you a quick run down on what an FHA loan is. A FHA loan is a home loan that is insured by the FHA, Federal Housing Administration. Borrowers pay an insurance premium to FHA which protects lender from a borrower default. Typically FHA loans have less strict requirements than other loans and in many cases allow for a smaller down payment. However, borrows must pay a mortgage insurance premium on a monthly basis.

On January 9th a reduction in FHA insurance premiums was passed lessening the insurance premium by 0.25%. This was set to go into place on January 20th. President Trump instead repealed this and froze the current premiums in place.

The NAR along with other organizations said that in 2017 roughly 40,000 would be home owners may no longer be eligible for an FHA loan because this decrease was repealed. Many news organizations and online columnists have since written articles with headlines and opening paragraphs that make it sound as if there were 40,000 people under contract for homes and now they won’t be able to purchase. Nothing can be farther from the truth.

For anyone considering an FHA loan that might be freaking out right now…don’t worry, relax! Calm down. Here are the facts.

The FHA premium reduction would have saved the average FHA borrower $500 per year which works out to roughly. $42 per month. If you want to equate it to loan value, the premium savings on a $200,000 loan would have been $29 per month.

However if you were quoted a FHA loan price your payment is not going up. The FHA premium reduction was not set to take place until January 20th. Underwriting was not being used to qualify people under the new guidelines. If you were set to close on a home you’re still OK because you were quoted at the old price.

Reporters and columnists can argue all day long whether or not the FHA should lower premiums. However, writing articles especially with catchy headlines to imply many people can no longer purchase homes is down right unethical and detrimental to our industry as whole. Understanding the facts of this change is what is most important and not furthering a political agenda or increasing readership a website.

If you want to know more about the cost of a FHA loan simply call a Realtor or a great mortgage broker. In addition to FHA loans there are MANY great FHA alternative programs that can be even cheaper with similar down-payment and qualifications. Don’t let all these online media sources scare you away from looking into purchasing a home.

Should I List My Property For Sale or For Rent?

When it comes time to move for whatever reason; a new baby on the way, a job transfer or you simply want a change of pace, the initial instinct for many is to list their property for sale. The basic logic makes sense. You want to cash out and use that cash for your downpayment on a new home. However, we’re finding that many would be sellers are now considering holding onto their property and renting it out for the added cash-flow and to have a tenant help pay down their mortgage. This blog will be dedicated to asking you some basic questions so you can help decide if you should list your property for sale or list it for rent.

How much can you get in rent for your property?

The first thing you need to do is determine how much you can rent your property out for. If you cannot achieve a high enough rent amount to pay for your holding costs (your mortgage, your property taxes, association dues and insurance) then you need to consider if it is worth it for the difference to come out of your pocket.

Make sure you work with a Realtor who understands the rental market well. The rental market is starting to change and will continue to do so over the coming years (and not in the landlords favor). Make sure you also consider what time of year you are renting out your property in. For instance rents are typically much higher in May than they are in November.

Does your association have any rental restrictions?

Well, maybe this should be the FIRST thing you look into instead of rental price. Some associations prohibit rentals. Make sure yours does not! Other associations may have a rental cap and if they have met this cap (number of units they allow to be rented at any given time) then you may need to be added to a wait list before you can rent out your unit. Check with your association management to confirm any and all rental policies and restrictions. For instance, did you know that some associations may be pet friendly but do not allow renters to have pets?

Do you NEED cash from your current property to buy a new one?

If you’re buying your next property the question is can you afford to buy it without selling your current home. Look at your finances and talk with your mortgage broker regarding this. Do you need to sell in order to have 20% down payment? Or are you OK with just putting down 5% on your new property? Balance out the costs of this as putting less than 20% down typically means you’re responsible for PMI (Private Mortgage Insurance) which will increase your monthly costs on your new home.

What is the interest rate on your mortgage?

I was speaking to one of my clients recently who was deciding whether to rent or sell. She said her interest rate on her 30yr fixed mortgage was 3.35%. That is VERY cheap money! That played a role in her decision process of whether or not to rent or sell. She ended up renting out her place. If you have an incredibly low interest rate it might be a good idea to hang onto that property and rent it out.

Will it be difficult for you to manage the property?

Some condos are very easy to manage because the building maintenance staff can help with any issues that arise inside your unit. Other buildings may be self-managed and this may mean anytime there is an issue you will need to hire someone to come in and fix the problem. This should be taken into account. For instance, if you’re living in the same city as your rental property then management can be very easy even if you’re in a building that does not have maintenance staff. Conversely, if you are moving to Hong Kong for work then it might be difficult to manage your property especially given the time difference.

Can you hire local property managers? Sure, but there is a cost to that so you’d need to factor that cost into your decision.

What will be the financial state of your condo association in the future?

I have some clients who own properties in buildings that are on the downward spiral. There might not be any special assessments planned but my clients are seeing the quality of the building deteriorate and they’re worried that the building may have financial issues in the future. This is definitely something you need to take into account when considering whether your should rent or sell. Sometimes it might be better to sell, take your profits, and run!

Are you cash strapped?

There is no way other way to ask this but, are you living paycheck to paycheck? If you are then being a landlord might not be for you. It is important to have some cash saved in case you have any tenant issues or any property issues. Landlords need to understand that when tenants move out they’ll likely have to paint the property and make some minor repairs in order to get it ready for a new tenant. Do you have the cash to do that? If your dishwasher breaks can you replace it for the tenant ASAP? If your Washer / Dryer goes out can you replace it ASAP?

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is a broker and trainer for the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pkblackburn.com