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everybody welcome to you thought i was gonna say avoiding but it's navigating real estate turbulence unlike bewitch where they switch darren's we're just changing one word in the name but it's still your same host tony and john i'm john lafferty with century 21 town and country all right i am tony abate with ross morges thanks for joining us again we were off for a while we took a little bit of a break uh covid upset our schedule just a little bit we're glad to be back on we're here in the killer studios of mammoth and and we're anxious to get back on yeah it's good to be back and because we were off for a while we thought we'd sort of do a recap of 2020 just to give you an idea of what was happening in the real estate market before covid when covet hit and then post covid just to give you an idea of what 2020 was like and kind of what we're expecting this year right yeah so so 2020 was to say as challenging as an understatement to say the least um you know on on or around march mid-march we all got the notification things are just shutting down and and uh you would hear about one thing that could not proceed and then another thing would be shut down and so on and so on and uncharted territory for everybody that's for sure and so all aspects of people's lives were impacted um you know certainly in our our respective businesses mortgage and real estate there was a big impact the first thing that happened is uh you know how do we not the first thing but one of the one of the more relevant things that happened was how do we navigate real estate uh with with the pandemic that that's upon us now and uh there were from my perspective i saw kind of two different things clashing number one we had the uh you know the legal things that that needed to be put into place could showings take place could showings not take place who could go where what could be open what couldn't be open and then you had you had where people's heads were at during all this too and that is well i know that i can do this but should i do i want to be going into someone's home do i want to be out do i want to be doing these things and is this even the right thing to do because of where the economy was it impacted thing people on so many different levels and you know it was new to everybody so all we could do is kind of do our best as we went forward so i think the first thing that i recall john is is when when 2020 happened the pandemic happened the buy and sell process of real estate it kind of just ground to a halt until people could figure out how to make it all work we had it somewhat easier on the mortgage side in that we could take our process from end to end and and do it remotely people could upload documents in a secure fashion we didn't have to see them but but we're just one part of the puzzle i mean aside from refinance transactions unless the purchase can happen then what we can do or can't do is is kind of irrelevant so um i'm thinking back to to how things transitioned and and how it did grind to a halt open houses really couldn't happen and then there was just really that thought of well how do we go forward you know some people were buying and selling a home because they wanted to and some people were buying and selling a home because they had to change in family size job transfer whatever but do you recall some of the conversations that you might have had with customers about hey what do we do now and we can't go into houses we can't do this we can't do that what do you recall about that happening january and february in into march was really starting off great in 2020. you know the number of sales were up year over year each of those months a number of pendings i should say and so we were really looking forward to a banner 2020 and then once covid hit it grinded everything to a halt for the most part now closings were still taking place but as you can imagine depending on where they were in the process if they weren't far enough along then they were just on hold and i actually had a transaction that was we we got the offer accepted the inspection was done and then boom shut everything down now they were still able to go through the loan process and get to a certain point uh the appraiser was able to walk the exterior of the property and get that done but we were still on hold for almost two months to get through that and it was the case with a lot of people a lot of realtors and they're buyers and a lot of sellers who were just kind of sitting and and showings weren't allowed now i'm not going to say that some showings didn't take place because i know for a fact that there were some out there who as we say we're going rogue and doing doing those things and uh you know listing agents were saying i don't want to know about it the front door is going to be unlocked the seller's going to be going to uh the drive-through for the next hour if you happen to be going there so you know stuff like that was had but those were the those were the exceptions not the rules most realtors um the majority of them i should say observed this and and you know took great care in making sure that their clients were were safe and themselves and then once we got to may and the governor uh said okay we're allowed to start showing homes again real estate is allowed to happen that's really when things started to take back off but you know at the same time like i had a listing uh that uh that i had been working on and you know this person and this person reached out to me and said okay so may 7th we're going live i want to go live um you know right thereafter i want to be at the front end of a bunch of listings that we're anticipating coming and smart decision on his part to do that because we were at the front end and as people started to trickle in and listing started trickling by the end of may it was it was crazy man step on the gas and get through summer it was just non-stop showings listings but certainly a lot les a lot less listings than the previous year over year and i attribute that to a few things one is some people just didn't want people strangers in their home um whether they were afraid of covid or their own health or whatever it was they just didn't want their home on the market and people coming through their homes other people it wasn't the right time some of them had lost employment were maybe in the restaurant industry making a move at that point they weren't going to qualify anymore because they'd lost an income so lots of factors went into the amount of inventory that was available and so what we ended up seeing heading into summer was a lot of buyers jumping back in ready to buy first time home move up buyers and the inventory just wasn't there so that led to a lot of bidding wars last summer a lot of knitting wars and you just had to get crazy you had to get creative you had to um necessarily recommend things to clients that you normally wouldn't and and if you did you had to caveat it with this is a risk you have to understand this but um fortunately most for my clients worked out and for some there were just certain things that they were uncomfortable doing and so we took the longer game approach you know uh okay so we're not gonna find a place in june we're probably gonna get aced out of a lot of these places because you're just uncomfortable going this far above list or you know doing these things with appraisals guaranteeing things and that's fine so i understood and they understood it's gonna be a longer process for you but as long as you're okay with it i'm okay with it and we'll find the right home eventually we'll find the right one somebody will appreciate your offer and you as a buyer and and we'll get it accepted and so that's it it was just a little bit of a longer a game approach to things um that that we had to take with some buyers yeah yeah but i think i think one of the crazy ironies of 2020 is again it was new to everybody nobody knew what to expect nobody knew how long it was going to last and so so many businesses took some defensive actions you know be it laying off staff or or scaling back operations or whatever and so there was all this uh care and concern over over what bad could happen in the future except for people's desire to buy homes it's almost as big of a purchase and as big as a commitment that as that is people seemed to set aside those economic concerns and and and chose to move forward with the home purchase and i don't i you know i don't hear a lot of people regretting that they did it uh real estate values are still strong my goodness the interest rates are were and are at historic lows but i thought it was an interesting departure between you know so many doom and gloom outlooks about the economy that might be coming down the road except for purchasing a new home and everybody was many people were gung-ho to go forward with that um you know it's it's a basic need it's a staple you got to have a roof over your head number one and number two i think the other part of it and and i think i'm surprised that this did not contribute to more inventory is that people had equity back in their homes that they that took them many many years to recover after the recession my gut told me that we would see a lot of homes come on the market so people could realize that equity but that really just didn't happen we are and have been in uh you know a tilted supply and demand situation we just have far more buyers than we do sellers right now our world was affected on the finance side not so much from the execution again you guys had challenges on the real estate side as far as just managing showings uh managing the fact that uh here in michigan closings really have to still take place in a in a face-to-face environment and and the rules were changing as we go and then the underwriting side on the on the lending uh side of the equation certainly changed as well part of that had to do with uh i guess from an overall standpoint when when mortgages are approved they're approved based on historic data you know we look at last year's w-2s we look at at last couple months bank statements etc but we were in a situation where we had somebody who was gainfully employed at the beginning of the situation and then just lost their job before it could all finish one of the underwriting things that had to happen is that we were doing employment verification figuratively within hours of the closing because we just had to get that close to it to find just to have assurance that the person uh was was still employed it's painful but it was really for everyone's benefit you know we're not helping anybody if we let them close on a home and their income stream has stopped happening with no end in sight but here's the interesting thing that kind of made that challenging so here we are uh we're we're not wanting to do that closings but we have to do employment verifications uh uh right at the tail end of the deal and where are all those hr people right now they're working from home and and that really added some turbulence to the mix and we got through it and and for the most part people were understanding um but it was uh it was it was really a snap to attention with our industry uh as far as you know what we we don't want to delay closings um you know people are waving their pace check stub at us i'm still employed i'm still here but we had to go through that part and and we navigated through it uh you know one of the results of the covet thing that happened to us you know the other thing that that came into play from a financing standpoint was how self-employed people were were affected as well you know you've worked with a lot of self-employed people over the years and and again the problem that we had is that when we review the finances of self-employed person what are we looking at we're looking at those tax returns well in the context of covid that was like from flintstones era they were they were really old compared to what was going on in business right now and so things had to change whereby uh we had to look at at bank statement activity for the business and we still do is that is that business making reasonable deposits that at least make it look like a similar income stream as they had when they filed their last tax returns they have to prepare p l's for us to show that you know what's going on right now is reasonably close to what was going on with the tax returns um and it and it's tough you know as as we were talking about in another episode um businesses were all over the spectrum as far as how they were uh uh affected by the pandemic and we just had to do the best we could to stay ahead of it and and make good lending decisions because of that so it was tricky times and it's still tricky but we've got we've gotten used to it to an extent right i mean we've gotten a little better with it and and people kind of have that expectation now because goodness gracious we've been living with covet for a year and and it's just kind of a part of our everyday process it's it sounds kind of strange to say but for me as a realtor it's generally speaking not my first thought uh you know when entering a house of okay i got to do this and this and this uh having a mask on and if gloves are required or i got to put booties on it is what it is it's somebody's house you're entering somebody's private residence and if that's what they're requiring well then you try to respect that it's just part of the process right now i mean closings are usually people are wearing masks we have shields and everything else you know it is what it is right now and uh i don't fight it it's just it's partly it's it's a normal part of how we do business and how we get from beginning to end so i don't i don't see it as anything other than part of the circumstances right now and uh eventually sometime in the future it won't be right right i think one of the interesting things that happened too in 2020 was the uh the speed of of the execution of allowing mortgage forbearances so you recall there was a certain amount of economic panic in the air at the time nobody wanted to see things that would would trigger another recession like like happened before and so one of the real quick decisions in our industry was okay folks you can request a forbearance on your mortgage if you've been impacted by by the pandemic but the interesting thing is there was no burden of proof necessary so and and i think it was one of those uh situations where you have uh you know good intentions maybe poor execution and and the reason they did it that way was expedience right i mean if they didn't have to evaluate whether somebody needed that assistance in the forbearance or not then they could they could get to that green light on the forbearance sooner but the reality is um you know right wrong or indifferent a lot of consumers were simply saying why not if i can hold off on making mortgage payments whether i'm impacted or not why do why would i not do that well there were a couple reasons number one what else is going on at that point in time refinances right and so you had this this crazy juxtaposition where people were saying well i want a forbearance and i want to not make mortgage payments but i also want to refinance my loan and get a lower interest rate well as an industry we're a little sensitive to when mortgage payments aren't being made right and so there was some gyrations and guidelines around that uh at the end of the day uh the common sense a requirement was look before we can help you with that with a new mortgage you got to get the current one current so so that that's what ended up happening but there were there were some some guidelines in place for a while that said uh not only do you have to be current but now you have to make the next three payments on time you can't make them in advance and so it's going to take three months and then we'll talk to you about a mortgage approval um you know that backed off and now we're at a point where we can just show that they're current and close them on a new mortgage but it created uh some crazy whipsawing and interest rates you might recall too um and and part of it was due to the fact that uh the mortgage industry had this predictable incoming stream of money in th form of monthly payments that was just stopped it just stopped happening now without getting too far into the weeds the people that own those mortgages have to pay out interest payments to the people that have invested in those mortgages now you know those mortgage payments coming in have stopped the mortgage servicers they still had to meet their obligation and pay that money out and uh the industry got frightened needless to say and and so interest rates were really gyrating for a period of time a lot of the fringe mortgage programs just cease to exist and and still don't exist today to a great extent and certain types of lending became very hard until we could just kind of come back and find our center and figure out what's going on here the other part of that is nobody knew how many people were going to request forbearance and and so it was like well you know there's a nuclear bomb up there somewhere is it going to land on my head or this guy's head or what and and fortunately i think as as as the country and the world kind of got a better feel for how the pandemic was was playing out uh things became a little more predictable the number of of requested forbearances have gone down consistently over the last six to nine months and and and things are more financially predictable now so we're back to a very low interest rate uh period again um again it didn't stop home buyers when all that was going on interestingly enough and uh and we got through it and i think a lot of people in the joint industries are saying well my goodness if we got through 2020 we can probably get through anything homeowners who saw this or saw this coming down the pike got out in front of it and leveraged their properties pulled equity out refinanced did a cash out refi or opened a home equity line of credit so they could take out cash just in case and uh you know i had a home that i'd sold last summer and the homeowner had done just that owned that house free and clear decided to do a home equity line of credit and pull 150 grand out of that house well for somehow some reason it wasn't found until we were three quarters of the way through the process you know sellers said oh no there's no loans on the property at all no i own it free and clear there's no it's there's no liens you know lo and behold the title company finds this bring it to the listing agent's attention and listing agent says i don't know what you're talking about they want it free and clear i said well here's the paperwork yeah you know the guy was actually stupid enough to think that he could well he was ill-informed to believe that he could actually take money out of a house and and try to skate and leave the buyer holding the tag oh my gosh yeah yeah crazy decisions you know when when when the unpredictable is in front of us you know a certain percentage of people are going to make irrational decisions and yeah i agree people were looking to take equity out and i think in part because one of the conclusions since there was an unclear future with with our side of the equation is if i don't take this equity out now and have a cash cushion i'm not going to be able to take it out again because the lenders aren't going to lend that didn't happen but nobody knew at the time and and so a lot of people did that i saw with with buyers that we had worked with in the past you know folks that could make you know 30 or 40 even a 50 down payment on their new purchase saying you know what i'm going to snug it back to 20 because i want that rainy day money just in case because i still don't i'm anxious to buy the home i'm ready to over bid on this home i'll put an appraisal guarantee but i'm going to keep a little cash cushion over here just in case uh something happens and so it was an interesting mix of conclusions that people were yeah we we we did see that we did see that a lot with the offers that that that we made you know it's interesting that um the buyers today in last year and 2019 they're different you know and you know this you will pre-qualify a buyer who's who that you say hey good news you're pre-qualified up to 300 000. here's what your payment would be and they go whoa no no no no not comfortable with that what would my payment be if we were at 240 what would be this that's what i'm comfortable with that's my maximum that's what we're gonna buy and see this time and time again i mean i have two purchasers right now who told me exactly that you said here's what they're qualified for they said nope right this is my limit right here which is great it's great that they're under buying what their max is it puts them in a better financial position long term for sure and and it's refreshing to see uh any day of the week i would rather have the consumer draw the line in the sand as opposed to me having to say no you're you're capped out it's just a different mindset i agree with you 100 percent you know pre-recession folks were reaching for the stars weren't they how much can i borrow because my neighbor up the street seemed to be able to borrow that much so i can too and now uh they're taking a far more conservative approach they're doing their own sort of self-medicating as far as their finances go and they're saying look this is it this is my comfort level regardless of that qualifying and that's a good thing we've talked about it before you know with with with folks drawing that type of conclusion over the last handful of years the current crop of homeowners is really really healthy uh because of making those kind of decisions they had to go through uh we could arguably say post recession underwriting guidelines which weren't hugely stringent but it wasn't the wild west days of of pre-recession so that coupled with consumers generally making more conservative decisions uh just made for that healthy crop of homeowners that exists right now and that's a good thing yeah 2020 is something that i think that we learned a lot as far as how uh how the industry can execute and and and where consumers tolerances are and things like that i i think we'd all just as soon say good riddance and let's try to get back to normalcy in our in our businesses and so on um but uh i i think i think one of the positive takeaways is if we were having this conversation um last march or last april you know we had no idea what the future was going to hold and there were a lot of scary conclusions being drawn and at the end of the year we kind of were able to say all right we got this yeah yeah i mean you're absolutely right there are a lot of scary conclusions a lot of people saying do you remember the bubble of 2008 this is gonna be worse right i i never believed that never believed it for a second i just think that there are people way smarter this go around and a lot of people had equity so i just didn't see that happening um and so yeah you're right 2020 is over with i'm glad that it that we're past it i think it was a very successful year for a lot of people a lot of realtors a lot of lenders the housing industry uh overall for homeowners equity appreciation that all grew last year uh and for 2021 i will tell you that you know here we are towards uh you know heading towards spring and um you know one of the things that's interesting to me is five years ago 10 years ago we used to say well you know it's winter now and things are really slow december january february things start to pick up a little once you get into the early days of spring you start to see a little more foot traffic that's gone yeah i i mean it's it's year-round buying season now and um so you know i used to be able to say to a buyer who was particularly limited in their financial ability to purchase you know a smaller limit maybe an fha or a va loan which are fine loans but a lot of sellers have a different opinion of them unfortunately you know you should be able to say to that buyer hey december january february most buyers are kind of on the sidelines that's our time to find something for you not the case not now yeah it's competition 12 months a year right right so far this year for sure yeah i couldn't tell you the last time i've been in january and had to tell folks be a little patient appraisers are really busy right now the volume is high and it's january it's unprecedented so but in any event that that launches is up for a strong 2021 we're excited about that and uh boy i'm just glad to be back on with you again with our with our podcast and uh anxious to convey some good information yeah it's it is great to be back and uh so more episodes to come uh good topic i'm glad we were able to to wrap up 2020 put a nice little bow on it and say see you later all right thanks everybody thank you guys so much