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Tarek El Moussa

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Exclusive: Tarek El Moussa Reveals What Turns a Real Estate Deal Into an Epic Flop

October 26, 2018

Negotiating a real estate deal can be a daunting endeavor. There’s so much at stake! As a house flipper who’s bought and sold hundreds of homes on “Flip or Flop,” I’d be the first to say that I’ve made plenty of dumb mistakes that cost me hundreds of thousands of dollars.

If I’ve learned anything, though, it’s that you don’t have to brave the home-closing process alone. A whole cast of professionals can save a seemingly doomed deal, and while they charge for their services, I’m going to explain why they’re worth every penny. Allow me to introduce you to three key players you may meet in the process of buying, selling, or financing a home, and how they can keep your deal from imploding.

A mortgage broker

When I was 21, I wanted to buy my first home, and I found the perfect property in Orange County, CA—a bachelor pad complete with a shark tank.

I was so excited and ready to buy that home, I went to a lender to get qualified for a loan. This person told me I’d need a 20% down payment … but all I had was 10%. As you can imagine, I was pretty bummed!

But I didn’t give up. Searching for alternatives, I came across a mortgage broker. Unlike a lender, a broker has access to dozens of different banks with different financing guidelines. By shopping around, this broker was able to find me financing with only 10% down.

It put my dream home back within reach.

What I learned is that if you’re struggling to find good financing, it’s worth checking with a mortgage broker who can do a deep dive through all your options. Granted, mortgage brokers do charge for their services, but it ends up costing about the same as a bank. I, for one, wouldn’t have been able to buy my first home without a broker’s help.

A home inspector

Many years ago I was working with a buyer who fell in love with a house that was pretty much new. Since the place looked so pristine, the buyer didn’t want to bother hiring a home inspector—in his mind, it would be a big waste of money. What could possibly be wrong with a new house?

But I was adamant that he hire a home inspector anyway. And a good thing, too! During the inspection, we learned that the roofing used on this house was so heavy, the structure below might collapse beneath it.

Can you imagine if we hadn’t done an inspection and this buyer had moved in? Disaster.

We were able to negotiate with the seller and demand they repair the roof to the tune of about $20,000. Home inspectors typically charge $300 to $500—a small price to pay to protect what will probably be the biggest purchase of your life. Right?

A real estate agent

Odds are, you’ve wondered what real estate agents do to earn their commission, which varies by agent but hovers around 6%. On a $300,000 house, that amounts to $18,000.

While this might seem like a lot, home sellers should keep in mind that their listing agent splits this fee with the buyer’s agent, so it’s already down to about 3% each. The commission also goes toward a whole bunch of other expenses, including the money it’ll take to market your home.

While it might tempting to cut corners and try to negotiate with an agent for a lower commission, all I’m saying is, you get what you pay for. Really.

A few months ago, I met with a guy who wanted to hire me to sell his house, only this guy was looking to save some money, and offered me a 4% commission.

I said I wouldn’t do it. He was shocked.

“I’m sorry, but my time is valuable, and 4% was not worth my time,” I explained.

He didn’t believe me, so I politely thanked him and we parted ways.

A half hour later, he called me and offered me 4.5%.  Again, I said no.

This seller did eventually find an agent willing to take 4%. Only once his house was listed, it just sat on the market untouched. After three months with no buyers, the listing expired … and the seller called me, again, agreeing to pay my full commission.

Within three days of listing the home, I generated four offers and sold it for $20,000 over the asking price that the previous agent had set.

My point is not to pat myself on the back. (At least, not much.) It’s to show that many home sellers’ efforts to save money can backfire, badly.

You don’t make money selling your home by reducing commission. You make money by hiring a great real estate agent who’ll sell your place for the highest price possible, while answering the many questions you’ll have along the way.

Follow Tarek on social media @therealtarekelmoussa, and if you’re thinking of selling your home, buying a new one, or in need of some renovation, take a look at Tarek and Associates for more information.

The post Exclusive: Tarek El Moussa Reveals What Turns a Real Estate Deal Into an Epic Flop appeared first on Real Estate News & Insights | realtor.com®.

Exclusive: Tarek El Moussa Opens Up About the Disastrous Mistake He Made Buying His First Home

August 3, 2018

Tips from Tarek el Moussa

Noel Vasquez/Getty Images; pixeldigits/iStock; realtor.com

I’ll never forget the first house I ever bought: I was 21 years old, searching real estate listings for a place in Orange County, CA, for about $400,000. Then, one morning, I found it.

It was the perfect bachelor pad—1,400 square feet, massive master bedroom, man cave all to myself, and coolest of all, a 300-gallon shark tank (may I remind you I was 21 at that time?).

I fell in love. The catch? The asking price was over $800,000.

The seller—who was present during the showing—said, “You should buy this place.” I laughed, thinking there’s no way I’d be able to get a loan for that much, but that if I could, I would.

By the time I was finished with the loan officer later that day, I’d been approved for an $800,000 loan. Somehow, I pulled it off and bought my first home.

And I was very, very broke. With no money for furniture, I ended up living in an empty house for nearly nine months.

That was fifteen years ago, and although I laugh looking back at it now, the experience taught me an important lesson: Buying a home is exciting. So exciting, in fact, that it’s all too easy to get swept up in your emotions and make some mistakes.

So here are some home buying doozies I’ve seen—and made—myself. Check them out and benefit from this hard-won wisdom!

1. Going house shopping before mortgage shopping

When I was just starting out, I worked with a very sweet couple who had just had a baby and who were looking to upgrade. I drove them around town showing them the homes I thought would earn me the biggest check. They told me they had excellent credit, steady jobs, and had set aside a sizable down payment for the purchase. They were excited, I was excited, not a worry in sight.

After seeing roughly 30 homes, they decided on the one. Offer in hand, I called the listing agent. The seller, in his wisdom, came back with a request for the letter of mortgage pre-approval from the bank. My clients had told me that they’d already begun the loan process, so that didn’t ring any alarm bells for me.

But after three days of going back and forth, we discovered that the bank was only willing to lend half of the $550,000 they needed for the loan. Not only did I look like an amateur (which I was), it was a total waste of time for all of us. The couple decided that they would continue renting, and I lost the time and the commission I was so counting on.

If you are serious about buying, be serious about the financing, and get pre-approved for your loan. Having a pre-qualification letter does not carry as much weight. There’s a big difference between what banks say they are willing to lend you and what they actually end up lending.

2. Buying a house beyond your budget

How many times have you gone to the store to buy one thing, but ended up spending more? Same can happen with real estate—and while expensive homes may have everything you want, they’re never worth the trauma of struggling to make monthly mortgage payments. Financial peace of mind is worth its weight in gold. This is why banks cap our borrowing limit—they know the breaking point, even if you don’t.

This is what happened with my first home, but I’ve seen it happen for many others, especially when kids get involved. I once went house shopping with my friends James and Joy. Four homes in, we walked into a great home with a large backyard and a pool. Their son Charlie was so excited about all the fun he’d have inviting his friends over that his parents soon wanted nothing more than to give him those happy childhood memories.

A year in, James and Joy were so stressed by the monthly mortgage payment, they ended up selling at a loss.

3. Gushing about how much you love a home

I once had a client walk into my listing and, from beginning to end, complain about how awful the house was—in front of the owner, no less. I figured I’d never hear from those buyers again; nonetheless, they put in a low offer, and it was accepted, all because this buyer had made the seller painfully aware of all the problems with his property. Talk about the power of suggestion!

But if you truly love a home? Watch out: If you’re at an open house and gush over how perfect the place seems, the listing agent is probably listening in—and will likely advise the seller not to budge on their asking price. Real estate agents are amazingly good at reading emotions and using every bit of that knowledge to negotiate to the last penny.

4. Bypassing a home inspection because the house looks perfect

One time at the start of my career, when I was trying anything and everything, a homeowner called me with a proposition. He had an old home he’d just inherited, and no cash for renovations. He would put up the property, I would put up the cash to renovate, and the profit we would earn when we sold would be split 50/50.

We started … and it was one thing after another. The electric system needed to be totally replaced. The pipes were rusted. Then we found termites. It got to the point where I’d feel nervous whenever my phone rang. When we finally sold, I lost money. I’d been certain it would be a sure thing.

It wasn’t.

Moral of this story? Hire a professional home inspector to carefully examine all the details and bones of the home before you buy. With a home, it’s what’s underneath that counts.

Just remember, building inspectors look for faults: It’s their job. So don’t get upset when you see their 40-page report. Pay attention to the big-ticket items, which include the electric wiring, plumbing, foundation, and things that concern health, like old building materials such as lead and asbestos.

This is why home inspections are a major contingency in most home purchases. One of my clients was so excited about a place, she decided to forgo the inspection contingency on her offer. The good news: Her offer was accepted. The bad: There wound up being an issue with the foundation that cost her an extra $45,000 to fix.

5. Assuming new construction is in great shape

One time, I put an offer on a new house being built in Tustin, CA. Since it was new construction, the buyers didn’t think that an inspection was necessary. I told them it was worth the few hundred dollars, and insisted. We ended up finding that the builder had faulty plumbing … which was found to be the case for the entire newly built neighborhood!

Even with new builds, do your due diligence.

6. Forgetting to ask about HOA/condo fees and assessments

There are a lot of gorgeous gated communities in Orange County, but those gates don’t come free. The expenses of maintaining the community are passed on to the residents in the form of Homeowners Association (HOA) dues. There are even some condo high-rise buildings in Irvine that charge more than $1,200 in maintenance fees per month!

That kind of expense is something worth knowing about way in advance. So make sure to ask about HOA/condo fees, taxes, special insurance, and any assessments on the property.

7. Buying just because you’ve had it with house hunting

It was a late Wednesday afternoon when I was at the office and received a frantic call from a buyer.

“We’ve seen every house on the market, but we’ve got to be out of our home in two weeks because our escrow closes then,” the client explained. In short: “We need a place now.”

No sweeter words to my ears! I showed them three properties, submitted an offer for one on Thursday, and closed within 10 days. They moved in right on schedule … but only then realized how wrong the house was for them. It was an open-concept floor plan that offered zero privacy, a huge problem since their parents were moving in.

It doesn’t matter if your wife is eight months pregnant, you got a new puppy, or you really just can’t stay in your apartment one more day. You cannot make a home purchase just because you are at your wits’ end. Take the dog to the sitter, drop your wife at her mother’s, and think it through. An impulse buy is never a good one, and a purchase out of desperation is even worse.

Follow Tarek on social media @THEREALTAREKELMOUSSA, and if you’re thinking of selling your home, buying a new one, or in need of some renovation, take a look at Tarek and Associates for more information.

The post Exclusive: Tarek El Moussa Opens Up About the Disastrous Mistake He Made Buying His First Home appeared first on Real Estate News & Insights | realtor.com®.

‘Flip or Flop’: Tarek El Moussa Is Still Christina’s Hero—and Here’s Proof

August 3, 2018

“Flip or Flop” stars Tarek and Christina El Moussa might be divorced, but perhaps that’s why it seems all the sweeter to see Tarek play the hero for his ex-wife, when they come across a scary situation in the latest episode of their show.

In “Shattered Flip,” Tarek and Christina try to open the front door of a four-bedroom, two-bath house in Lakewood, CA, that they’re considering purchasing, and find that it has been barricaded shut.

Uh-oh! Could there be a squatter inside? Tarek tells Christina to stay put, in front, while he goes around back to investigate. He finds something even more disturbing in back.

“Don’t come back here!” he shouts, alerting her that the sliding glass door in back has been completely shattered, and that it’s clear that someone has broken in.

What’s not clear is whether or not someone is still inside the house. While Christina waits nervously on the front porch, Tarek checks the house, room by room, to make sure no one is inside waiting for them. Finally, he removes the cabinet someone has strategically placed to block the front door, and opens up to Christina, telling her it’s now safe to go inside.

Flip or Flop
A shattered slider spells trouble.

HGTV

Granted, in reality TV shows like this, one has to wonder if Tarek and Christina might have been clued into this sketchy situation before showing up at the front door. Even so, Tarek still plays the perfect gentleman, and Christina appears to be grateful for it.

All the trouble turns out to be worth their while. Although the house is small (only 1,250 square feet) it has a nice open layout and appears to be in decent shape. Surprisingly enough, whoever broke in and blocked the front door didn’t trash it. If they can get it for under the $460,000 asking price and spend an estimated $70,000 on renovations, they believe they can make a good profit.

As they set about trying to accomplish this, they give us some smart advice on home buying, renovating and beyond—here are some of the highlights.

Ingratiate yourself with the seller

Tarek suggests they board up the sliding glass door while they’re there, to do the owner a solid and to protect their potential investment. Christina agrees, saying “I think they’d definitely appreciate that and maybe accept our offer,” which will be under the asking price.

Use the negatives as a negotiating tool

Although the house is in relatively good condition, Tarek uses the fact that it’s been broken into, and therefore has the potential to be broken into again, as a negotiating tool. In addition, the ceilings are low and covered with popcorn, and the bedrooms are small. Taking all this into consideration, he offers $440,000, and after some negotiation, gets the property for $442,500.

Always wear work boots on demo day

As Tarek inspects contractor Jeff Lawrence’s demo work, a sharp piece of scrap metal pierces the sole of his tennis shoe, and narrowly misses impaling his foot. “Good thing you’re not wearing the flip-flops anymore,” Lawrence teases.

No fiberglass showers!

If you’re living in a place that’s more than three years old, chances are you have a fiberglass shower somewhere in your home. This is an ultimate no-no for Tarek and Christina. The El Moussas replace the fiberglass fixtures with beautiful tile, which adds a sense of luxury.

Flip or Flop
Tarek and Christina select tile for the showers.

HGTV

Replace showers with tubs

The El Moussas also find that one bathroom has a shower but no tub. Unsatisfied, they steal space where they can (in this case, from the closet on the other side of the shower), to make room for a full bath—a high priority for families with young kids.

“I’m so glad we got a tub in here!” Christina says when they’re finished with the project. “I think buyers will definitely appreciate the bathroom more.”

Raise the roof

There’s a lowered ceiling over the kitchen, apparently for no other reason than to distinguish it from the dining/living room area. Once Tarek raises the ceiling to make it even with the rest of the home, the kitchen appears to be much bigger—high ceilings do that.

Spend more on tile for smaller areas

Christina is eyeing some very chic, yet very expensive, designer tile for the kitchen backsplash—at $21 per square foot! Tarek is reluctant to spend the money at first, but when Lawrence tells them there’s only about 30 square feet of backsplash space, Tarek realizes that this is a considerably smaller area than on most projects, and approves the purchase. And we must say it looks great!

Flip or Flop
Stylish backsplash tile is worth the splurge.

HGTV

Fix the cracked driveway

There’s no getting around it: If the driveway is cracked, you must fix it, no matter how expensive it will be. After all, it’s usually the first thing buyers see when they approach the house. In this case, the front yard is little more than weeds and cement, and Tarek and Christina must redo most of it anyway. So they create a narrower driveway, and add a foot path and flowers—improving the home’s curb appeal like crazy.

Flip or Flop
The landscaping attracts buyers to Tarek and Christina’s latest flip.

HGTV

So is it a flip or a flop?

Due to some unforeseen issues, Tarek and Christina end up pouring $94,300 into the renovation, rather than the $70,000 they were estimating it would cost. Adding in closing costs, they’ll have to sell the home for $555,000 just to break even. With comps in the high $500,000s, that doesn’t leave much room for profit.

So they decide to price it aggressively at $599,900 and see what happens. They do some savvy staging, and after only a week on the market, they get an offer over asking price—$607,000—which they happily accept. That’s close to about $50,000 for their hard work. Combined with Tarek’s display of chivalry toward Christina, this project’s clearly a winner.

The post ‘Flip or Flop’: Tarek El Moussa Is Still Christina’s Hero—and Here’s Proof appeared first on Real Estate News & Insights | realtor.com®.