Underwriting is Tough, But Resi is Stable
CARLSBAD, CA—Legislation like Dodd-Frank may have many unintended consequences that make operating in the residential market more difficult, but the sector itself is solid, which bodes well for CRE, locally based Buffini & Co.’s principal Brian Buffini tells GlobeSt.com. We spoke exclusively with Buffini, who has a long history as a residential broker, about the key to increasing residential property sales and trends in underwriting for this sector.
GlobeSt.com: What is the secret to increasing residential property sales?
Buffini: First and foremost, it’s the fundamentals, which are not very sexy to talk about. Building relationships and connecting with people, providing value that exceeds their expectations and developing a systemized method of following up are all important. Technology has grown, but emailing and texting are extremely marginal approaches. More than 80% of transactions in real estate are still repeats and referrals. Millennials make up 65% of first-time home buyers, and 95% of them start looking online. These days, you don’t have to talk to a realtor to get information on a property; you can get information prior to seeing it. But when it gets time to find a realtor, they get a
personal endorsement from someone they trust. The more things change, the more they stay the same.
GlobeSt.com: What keeps buyers from committing to residential properties?
Buffini: It’s the same thing that’s been keeping them from coming for the past 30 years I’ve been in business: uncertainty, either in the economy or with employment. Right now, there’s a shortage of inventory, rates are very low, and they will go up a small bit. This has created a little bit of a push lately—there’s been a lot of activity lately. Refis are high because people know rates are going up. There’s more construction thankfully, and there’s been a shortage of inventory for some time, but there’s more inventory being built to release in 2016. This will help, but with all the media outlets, when doubt creeps in, people go there faster, and conversely, people get fired up faster. There’s high demand and limited supply, and that’s not changing any time soon.
GlobeSt.com: How is underwriting changing for this sector?
Buffini: It’s tough, and there are unintended consequences when a law like Dodd Frank passes. They’re looking for perfect files, and it’s more difficult to find those. With the new TILA-RESPA laws, everything has to get pushed back if something is questioned or goes wrong. The business is becoming more difficult all the time. For my first home, I signed a one-page contract. It’s becoming more and more difficult and challenging, and that’s why people are still leaning on professional agents—there are so many ramifications. It’s like filing your own taxes.
GlobeSt.com: What else should our readers know about residential property sales?
Buffini: The health and confidence in the overall residential market has implications for all types of CRE. I believe the index is very high right now in regards to people having confidence in real estate. It’s more than the stock market. People are still interested in purchasing homes. Research shows that Millennials’ overall goal in life is to own a home. There’s high confidence there and in the employment market. The market is stable in residential, and it will be so for the next few years. Obviously, there’s a benefit there on the commercial side. The residential market is solid and a good bet for the commercial folks.