5 Ground Rules for Home Buying Success

Writen by Andrew Webber

There are few purchases in life that carry the financial and psychological weight of buying a home. Whether you are buying your first home, moving up to your dream home, or downsizing your home and your life after the kids have gone, it is important to understand the ground rules for success in the world of buying a home.

Making the wrong decision in buying a home can have devastating and long lasting effects, while making a wise decision in home buying can greatly enhance the overall value of the investment. It is necessary to learn all you can about the world of home buying and mortgages before setting out to purchase the home of your dreams.

While there are plenty of web sites designed to help first time homeowners learn all they can, most financial experts say that there is no substitute for the good old one on one learning. Fortunately, most mortgage lenders, home inspectors and real estate agents will be able to provide this kind of one on one learning.

When buying a home it is often best to use a systematic approach as this is often the best way to be sure that all decisions are based on information and reason, not on impulse or emotion. Buying a home can be an emotional process, nevertheless it is imperative to keep your emotions under control and not let them cloud your judgment.

There are five basic ground rules when it comes to buying a home and shopping smart, and they are:

#1 - Get your financing before you get your home

There are few things in life as disappointing as losing out on the home of your dreams due to not being able to secure funding. While the desire to get out there are search for that great home is understandable, it is vital to line up the financing you will need before you start shopping for a home.

Getting the financing ahead of time has a number of important advantages, including knowing how much you can buy and gaining more respect from the listing agents. By knowing how much home you can afford before you shop you will avoid wasting your time looking at unaffordable properties, and the listing agent will be more than willing to show you the homes in your price range.

It is also important to take a good look at the various types of mortgage on the market before getting started in the home buying process. These days, mortgages come in far more choices than the typical 15 or 30 year. For that reason, potential home buyers need to understand how each type of mortgage works, and to gauge which mortgage is the best choice for their needs.

#2 - Look at the community, not just the home

It is a good idea to look at the entire community, instead of focusing on a single home. This can be a particularly important thing to consider for those moving to a new metropolitan area, as these buyers will be unfamiliar with the local climate and lifestyle. It is crucial to determine the areas of town that are most desirable, and to consider things like distance from work and local shopping opportunities.

We have all heard that location is the key consideration when it comes to real estate, and that is certainly the case. Buying a house in the wrong area can be a big mistake, and it is important to choose the location as well as the home. Potential buyers can learn a great deal about the nature of the various neighborhoods simply by driving around town, as well as by talking to other residents.

#3 - Be fair with your first offer

Trying to lowball a seller on the first offer can backfire, as can paying too much. It is important to carefully evaluate the local market, and to compare the asking price of the home with what similar houses in the neighborhood have sold for.

Comparing the sales of comparable homes, what are known as “comps” in the industry, is one of the best ways to determine what is fair, and to make sure that you neither overpay or underbid on the property.

#4 - Always get a home inspection

Always investigate the home for any possible defects before making an offer. Compared to the cost of the average home, the price of a quality home inspection is virtually negligible. Hence, get a good home inspection done before you buy.

To find the best home inspector, it is a good idea to seek out word of mouth referrals as many of the best home inspectors rely on word of mouth advertising.

#5 - Do not alienate the sellers of the home

Many real estate deals have fallen apart due to the personal animosity of the buyer and the seller. It is important to avoid alienating the seller of the home during the process, and to avoid nitpicking every little detail during the sale.

Keeping the good will of the seller will help the transaction go smoothly, and it will provide the best environment for seller and buyer alike.

Andrew owns a website that provides tips on buying a house and more. You can visit his website at: http://www.buy and sell house fast.com/

Gray Power: Marketing to Canada’s Aging Population

Writen by Luigi Frascati

Ever since the first baby of the post Second World War generation arrived in the world, the ‘boomers’ have influenced every aspect of society and have pretty much had and done things their own way. Even now, as the leading edge of the generation has passed 55 years of age, nothing has changed, as affluent boomers are raising the bar on how and where they plan to live in their retirement years. According to a report of the Urban Futures Institute the aging Canadian population will consistently dominate real estate markets just about everywhere in the country.

Unlike previous generations who were more likely to move into smaller homes, eliminate mortgages and cash in their equity as retirement approached, the Freedom 55 generation, as it is sometimes called, is more likely to upgrade to more expensive properties, while assuming new mortgages. In 1999, 59% of Canadian homeowners between 45 and 54 years of age and 35% of those between 55 and 64 years of age held mortgages. In 2001, according to Statistics Canada information, those figures had risen to 61.6% and 39.1% respectively. In 2003 the ratio was 64.2%and 35.1%.

More expensive but not bigger properties, though not in all cases. There is a trend identified by the Institute for the boomers to make their way out of the suburbs and back into the city. And what do they want to find in the city? Fitness centres, fine restaurants, dancing and … yes, lots of people. The leading characteristic of the Freedom 55 generation is, according to the Institute, that they hate to be left alone. They are also going to be the happiest and heathiest generation of their age group in a long time, with a highly remarked hypocritical spirit. And who is going to be at the center of their hypocritical attention? The Federal Government (politicians beware ….), with women being the most vociferous.

The Urban Futures Institute prognosticates that in about twenty five years one in three Canadians will be over the age of 65. As by then they will have become empty nesters, they will trade down their 3,500 square foot homes in the suburbs for high class downtown condo living, thus driving prices upwards especially in the most expensive category. More and more the adult lifestyle component will be the major force impacting how condominium complexes will be conceived and built. It will impact developers, architects and contractors alike. And since the boomers are and will continue to be tech savvy high speed Internet, fiberoptics circuitry, satellite connections and electronic wizardry will be must have accessories. The Urban Futures Institute report concludes that it is going to be both a lifestyle and financial choice closer to downtown means closer to established shopping, restaurants and entertainment and boomers are of the mind the location will offer more liquidity in the long term.

Luigi Frascati

Luigi Frascati is a Real Estate Agent based in Vancouver, British Columbia. He holds a Bachelor Degree in Economics and maintains a weblog entitled the Real Estate Chronicle at http://wwwrealestatechronicle.blogspot.com where you can find the full collection of his articles. Luigi is associated with the Sutton Group, the largest real estate organization in Canada, and is based with Sutton Centre Realty in Burnaby, BC.

Luigi is very proud to be an EzineArticles Platinum Expert Author. Your rating at the footer of this Article is very much appreciated. Thank you.

Your Farmhouse Renovation Project in the South of France

Writen by Nick Dowlatshahi

You have just bought your gorgeous old farmhouse in the south of France and all it needs is some renovation and ‘TLC’ to become the home of your dreams!

A word of caution!

It is often all too easy to become wrapped up in your optimistic hopes and dreams and not spend enough time planning the renovation and ensuring that enough finance is in place for the project to be completed. The last thing you want is to buy that perfect renovation project only to find two years down the line that the roof is still leaking because you haven’t the money to fix it as you spent it elsewhere!

In England, before you buy a property it is standard practice to send in a chartered surveyor who can estimate the various costs of building repairs. This is not the case in France. You will need to ask a local builder, architect or a British chartered surveyor in France to check the structural state of the building and estimate what the repair costs will be before you buy. You should then add at least 25% for any hidden extras that the architect/surveyor may have missed.

It is also very important that you are realistic about the time frame in which your house will be ready to move into. A job that you might expect to take six months in England will probably take a few months longer in France especially if you don’t speak the language as it will take some time to find builders who come recommended and whose work you approve of.

Once you have bought your quaint but dilapidated farmhouse in the south of France which you have chosen for its laid back atmosphere, don’t be surprised when your tradesmen adopt the same attitude in their work regime… You will have to keep on top of them at all times to ensure that the work is completed on schedule and that everyone is synchronised.

If, for example, the electrician is booked to rewire the house within a certain time frame and he is delayed or does not turn up, then other jobs such as plastering that follow will also have to be delayed and rescheduled. This rescheduling may not be possible for some weeks which could in turn put other jobs behind schedule… patience is something that you will have to learn to embrace!

For instance, an English couple that relocated to the Rhone Alps region in the south of France found that their project actually took two years rather than one year as predicted. They spent the first few months cooking with camping gas and portable cooker while the kitchen was being built so be prepared to rough it a little during your adventure! Not that it’s a bad thing: it can actually be very enjoyable cooking and eating in the great outdoors after a hard day’s work watching the beginnings of your project slowly become the home of your dreams.

This particular couple actually spent the first few weeks living with their neighbours rather than staying in a hotel while the house was unlivable. The two of them simply went over to say hello and in a great gesture which you would find hard to come across in any part of the world, they were invited to stay for as long as they needed even though just moments before they were complete strangers!

The project was finally completed two years after they first bought the house and, regardless of all the headache and hard work they put in, if you ask them now they would say they really wouldn’t have done it any differently. The stone farmhouse has become a haven of tranquillity and something that they can both be very proud of as, every evening when they drink local wine and eat Provencal food in their scented, colourful courtyard, they can look up at their house and truly say “We did that”.

Nick Dowlatshahi is the managing director of Leapfrog Properties, a UK specialist agency in French property. Leapfrog offer an online database of up to 200,000 properties for sale in France plus a personal service from fluent French speakers to help you find, view and buy your property. The Leapfrog Properties website is at http://www.leapfrog properties.com

When Will It be the Buyer’s Turn

Writen by Martin Lukac

There has been a lot of talk about the market cooling. Does this mean it is now the buyer’s turn at benefiting from market conditions?

A buyer’s market occurs when sellers have little or no power in the negotiating of the sale of a home. The buyer has an advantage in that there are more homes to choose from. Housing prices may also be down due to the negotiations of wise buyers.

Are we heading for a buyer’s market? Some areas have shown indications that we are. In many areas, home sales have slowed down. Homes are staying on the market much longer. The longer a home is on the market, the sellers should be more willing to negotiate.

Not only is the inventory of homes for sale going up, but the housing prices in some areas have stopped increasing. A few areas are actually experiencing decreases in housing values.

You may be saying that interest rates are working against buyers, but that isn’t necessarily the case. Interest rates still remain at a reasonably low level. What this means is that the average person can still afford to buy the average home.

In fact, interest rates help create a buyer’s market. With interest rates on the rise, many homeowners are experiencing monthly payments on their adjustable rate mortgages. Some homeowners who purchased at the peak of the market are just now having their mortgages adjust. There are reports of payments doubling in size for some borrowers who took out risky loans.

Foreclosures are on the rise. People just can’t afford their homes any more. They have to sell and they have to sell quickly, before they are foreclosed on. With more and more homes popping up for sale, buyers will have plenty to choose from.

All of these conditions give buyers an edge in the real estate transaction process. Buyers don’t have to jump on the first home that they see because homes are no longer few and far between. In many cases, bidding wars won’t be an issue. Multiple offers may still occur, but buyers are likely to be a little more relaxed. Of course, this is in general there will still be areas and neighborhoods that are experiencing a lot of buyer demand.

If you are looking at buying a home in an area that is experiencing a slow down or buyer’s market, you can use things to your advantage. Find out your seller’s reason for selling. It could be that time is of the essence, giving you an edge. If there are any contingencies that you need to include in the contract, now is the time. Sellers that are having a hard time selling their homes are more willing to do what is necessary.

Don’t forget to have the property appraised and make sure that there is an appraisal contingency in your contract. If you are in an area that is experiencing quickly dropping home values and your closing is several months away, I would go ahead and have the property appraised for a second time close to closing.

You should also have the property inspected by a professional. This should happen in both buyer’s and seller’s markets. You wouldn’t buy a car without a test drive, so make sure that you at least look under the hood of the home.

Buyer’s markets are great for buyers. If you are in the market to buy a home, pay attention to the home sales in your area. But don’t worry too much about the market, what counts the most is buying a nice house that you can afford.

Martin Lukac, represents http://www.RateEmpire.com, a finance web company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Visit http://www.RateEmpire.com today.

What Does It Take To Be A Donald Trump in Real Estate?

Writen by Suzee Miller

Since you are a business oriented person, you might be thinking: “oh, great, here it comes another fad that sounds to good to be true and I don’t have time for this now.” Well, the fact is, like gravity you do not have to believe in Feng Shui for it to work. Whether you believe in the law of gravity or not it exists, and it affects everything you do. As Donald Trump said: “I don’t have to believe in Feng Shui, but I use it because it makes me money.”

It is no surprise that famous people like Trump, Oprah and Spielberg and the largest companies of the world such as Coca Cola, Sony, Shell, Procter & Gamble, and others actively embrace Feng Shui. These companies and people practice Feng Shui principles as a way to add value to their service, to increase their profitability, create harmonious relations among employees, and to reduce employee turnover. Not only that, Feng Shui differentiates them from their competitors while multiplying their earnings and free time.

Feng Shui is not a fad, nor is it about religion, philosophy or superstition. Feng Shui is the art and science that unites time, space, people and the environment as one integral entity. Learning how to integrate Yin/Yang (opposite polarities) and the five elements..FIRE, EARTH, METAL, WATER, WOOD in your office decor, and arranging furniture to empower you…relaxes the nervous system, inspires the mind and calms the emotions. This equates to highter productivity, improved health, better relations, and more prosperity and financial fortune.

5 WEALTH Producing Principles of Feng Shui

1. ENERGY Everything in your office is alive with energy. This includes: people, animals, plants, chairs, desks, art, etc. Every single object you have in your office talks to you with memories and feelings. To create an environment that supports and empowers your career goals and objectives, surround yourself with furniture, business equipment and decorative items that reflect wealth and success.

2. SIMPLICITY Less clutter means MORE opportunity and good fortune in your business and personal life. Here are some examples of what clutter in specific areas of your work environment actually means: Clutter located in the entrance of your office represents fear of relationships. If you have lots of clutter on your desk, it symbolizes frustration, fear of letting go or the need to control everything. In the corner or behind a door represents detachment from others. Clutter under your office furniture represents the importance of appearances to you. And, if you have clutter all over your office, it usually indicates frustration, anger, and sometimes even self loathing.

3. BALANCE In Feng Shui there are 5 elements that govern a balanced environment: Fire, Earth, Metal, Water and Wood. An office environment with an over dominate element i.e. too much WOOD will deplete your health and finances over time. Conversely, the absence of an element such as FIRE can wreak havoc on your reputation and fortune. Harmony, peace and prosperity flourish in a balanced environment.

4. HEALTH Invisible EM waves from your monitor screen, cell phone, flourescent lights and other office equipment deplete your energy and reduce your productivity. EMF’s (Electromagnetic Fields of Energy) are often overlooked and can cause grave danger to your brain, nerve, endocrine and reproductive systems and to every related organ and bone in your body. According to Dr. Yao, a research physicist, “The typical American receives electromagnetic radiation up to 200 million times more intense than his ancestors took in from the sun, the stars and other natural resources.” Thus, it is imperative that you protect yourself and your employees from office RADIATION, and create a healthy and safe work environment for business and people to prosper in. For more information visit www.fengshui4RE.com

5. POWER A classical school of Feng Shui called Eight Mansions has created more millionaires and billionaires than any other school of Feng Shui. This School capitalizes on specific directions for health, for negotiating, for selling, for communicating, for exercising and for sleeping. Honoring your personal power directions at work, will enable you to reduce stress and work less while increasing your WEALTH. Discover your power element at: www.chiquiz.com.

10 Feng Shui Office Tips for Success:

 Make sure that you have a desk or workspace dedicated just to you and your business

 If working from your home, avoid working in your kitchen, dining room or master bedroom

 Space clear (remove) clutter in your office

 Avoid calendar bottlers on your desk as they distract your focus and attention

 Keep only one family photo in your office

 Learn the simple 5 Element Business System to multiply your sales, income and free time

 Use Chi enhancers such as plants, fountains, flowers and artwork to beautify your office

 Place your desk in a commanding position honoring at least two out of four of your power directions

 Avoid sitting with your back to a window, an aquarium or an open door whenever possible

 Set the Intention for WEALTH using the energy blueprint of Feng Shui

“My business increased over 300% since consulting with you by phone this year. Who would have guessed that Feng Shui would even work in Iowa!” Tracy Ehlts, R.E. Broker

“I earned $89,000 the first 40 days after learning your 5 element business system, and I feel on top of my business for the first time in my real estate career.” Linda Reynolds, RE/MAX Realtors

“In less than 9 months I’ve earned over $1,000,000 in commission income since Feng Shuing my office, desk and learning your amazing business system!” Dinorah Carmenate, R.E. Broker

Feng Shui is the communication that takes place everyday between you and your environment.

At a glance, take a look at your office, desk, car and briefcase and see what your work environment is trying to tell you about the quality of your health, relationships and career!

SUZEE MILLER

Super Star R.E. Broker, Feng Shui consultant, author and professional speaker, Suzee Miller, is famous for her 5 ELEMENT BUSINESS SYSTEM. Her simple to learn 5EBS has helped thousands of business and real estate professionals achieve WEALTH in record time. In addition, Suzee is a popular guest on radio and Televisions talk shows, and has authored 17 audio programs on Feng Shui applications in real estate. She has spoken at NAR, CAR, WAR, WCR and at architectural, building and real estate conventions nationwide. To schedule a Feng Shui consultation or speaking engagement, contact Suzee direct at 800.499.7844

Suzee@FengShui4RE.com www.FengShui4RE.com

Selecting a Realtor To Sell Your Home

Writen by Bill Wehr

Your home is more than likely the largest asset that you have. You want to get the most money out of the sale of your home. At the same time you want to have a realistic marketing time of your house with a sales price that meets your expectation. This is where picking the right realtor is so important.

Wherever you live there seems to be a disproportionate amount of realtors around in relation to the population. Indeed, if you live in a medium sized city, there are generally thousands from which to choose. You can ask friends or relatives their experiences in selling a home and if they would recommend the realtor that they worked with. This can be a start. You may see and hear advertising in your area by real estate companies. Once you start the selection process pick at least 3 5 agents to individually meet with you at your home.

First impressions count. The realtor should be prompt for the appointment. The realtor should be prepared to ask you specific questions concerning your home. The realtor should have an information checklist with him. He should come back to you at a later time to give you an objective as possible listing price with a projected marketing time for the sale of your home. You do not want a yes man who will give you what you want to hear. You want to have a list price that is presentable to the public based on recent sales. You do not want a high list price that was given to get the listing. This will only have to be reduced at a later point after losing valuable “new fresh” on the market time.

You have every right to ask questions of the realtor. In addition to what the commission will be, you would want to know how well this realtor knows your neighborhood. You would want to know if the realtor is full time or part time. You want to know what are the steps that will be taken by the realtor to present your home effectively to the marketplace. You want to know how long this person has been in the real estate profession and what that person’s production has been over that last year. If you are the type of person who requires on going communication during the marketing process ask what is the realtor’s response time.

You want to have an honest agent. This agent should keep your confidence and be frank with you at all times. This will create a sense of the realtor and you being a team and real partners.

Taking the time to select one agent from several agents does not guarantee that you have made the best choice. However, you will greatly reduce the stress, and not have diminished results sales price wise, by demanding and expecting quality professional service up front.

Bill Wehr has been in home loan origination for over 25 years. He is the owner of Great Pacific Northwest Mortgage http://www.billwehr.com, a residential mortgage company serving Oregon and Washington.

Foreclosure Homes for Sale

Writen by Ivar Rudi

Are you on a small budget, but you want to purchase a home? If you are on a small budget, and you want to get a home, to start living as a family in an area that you love, look towards homes that have recently been foreclosed. A foreclosure is one that someone else has lost. The homeowner may not have been able to keep up on their mortgage payments, and the bank has taken over the property. Banks and financial companies don’t like to hold onto these properties for long, because of the interest, the payments and the money that is being lost over all.

To find a home that has been through foreclosure you can begin your search online or offline. Many links to foreclosure companies and banks are going to offer listings of where foreclosure homes have been located. A foreclosure company is going to offer great rates, and will offer great prices on homes that they want to sell.

While nothing can be done for those who have been through the foreclosure process, and for those who have lost their homes, you can take advantage of the situation. You can purchase home, at a reasonable cost, and create a home for your family.

To purchase a home that has been through foreclosure, the process is going to be very similar to that of any other mortgage. You will have to apply for a mortgage, you will have to pass the background check, and you will be subject to interest costs, and closing costs of the mortgage. A foreclosure home may require some additional legal background work, so you will need to hire an attorney to look out for your best interests.

A foreclosure home is one that has been abandoned because the previous owners could no longer pay for the home. You will find that many types, sizes, and styles of homes are often included on the foreclosure listings by banks. You will find one bedroom homes, two bedrooms homes, rental units, retail and commercial buildings and you will find luxury homes, vacation homes, even mansions included on foreclosure listings.

The home of your dreams could be very affordable if you take the time to look at the foreclosure listings. The foreclosure listings will give you an idea of the city and the state where the home is located, and from there you are often required to contact the bank, the financial company or perhaps a real estate agent as listed, to find out more about the property. The only limitations you will have in purchasing foreclosure homes is going to be your credit limit and where you want to live. Homes from across the nation, from Vegas, California, to Virginia, Florida and in Washington are available for purchase.

Copyright 2006 Ivar Rudi. For more information and resources about this subject check out: http://www.stop foreclosure guide.biz/

Negative Gearing It’s Not to Your Benefit!

Writen by Naomi Warne

The concept of negative gearing has been originally developed to encourage real estate investment in Australia by allowing any income losses from property investment to be deductible from other income as a tax benefit. This means that the taxable income of the owner will be reduced after the deduction and therefore the total tax payable is also reduced.

In view of the fact that many of the profits from property investments are usually obtained as a capital gains at the time when the property is sold, but do not generate positive cash flow from rentals during the course of the holding period, negative gearing therefore came in to address this issue.

You lose either way

However, the flaw with negative gearing lies in its concept as well. If an investment generates a positive cash flow, the increased income will make the investor liable to pay more taxes as well. In the end, the investor loses either way. If he makes money from positive cash flow, he has to pay part of it off in taxes, while negative cash flow will take money out of his pocket. Therefore, with a negative geared property, it is not possible to get a positive cash flow and pay less tax at the same time.

No guarantees on property value appreciation

Investors who are encouraged to put their money into negative geared property should think twice. As these properties are expected to generate profits only through capital gains, the value in capital gains should then be greater than the total losses incurred over the course of the holding period. However, there is no guarantee that the value of the property will appreciate, or at least appreciate enough to cover your losses. Also, you can’t possibly use your expected future profits now as it is not been realized yet.

Beware of attractive property packages

Who gains from this then? Well, investors who are seeking investment property will tend to seek out property developers or sales agents. In order to make a property seem attractive, they are packaged with elaborate financial models with expected returns on investment. However, commissions and profits to the developers have all been packaged into the sale price. With this, investors end up paying premium price for a property with negative cash flow, which is used to pay for hefty commissions to sales agents and developers.

The disadvantage of property depreciations

Another aspect that should be watched out for would be property depreciation for taxation purposes. While it is true that depreciation is applied and is used for tax deductions, however, accumulative tax deductions for depreciation costs on property with appreciating value may cause capital gains taxes to be large. This is because the greater depreciation you apply onto the value of your property, the lower its value will be on paper. Therefore, your difference between the sale price and the book value of your property at the time of sale will be great. This leads to larger taxes imposed onto you.

Do not purchase because of tax benefits

Finally, making a property investment requires careful planning and consideration. Extra caution must be put in especially when a property is projected to generate a negative cash flow. In the end, tax benefits should not the main reason for property purchase. You may end up losing a great deal of money in the end.

For more information, please visit Mortgage Mall Australia.

Naomi Warne of Around the Corner Real Estate Dealers, Sydney, has helped her clients with profitable property investments and numerous tax benefits. Having started as a real estate agent, Naomi has established herself as an analyst and property consultant.

Banks and Monetary Policy: the Mechanics of Interest Rates Setting

Writen by Luigi Frascati

We hear a lot about interest rates, and not only in my professional field of expertise. Interest rates are everywhere to be found in our daily lives: credit card interest, interest on deposits, car loan interest, personal loan interest, treasury bond interest. The other day I received a spam e mail that said: “Need new socks ? Apply for our Family Loan competitive interest rates”. Since I am single and own approximately fifty pairs of socks they seem to be the preferred Christmas present in my household I decided not to push the ‘Click Here’ button. But just what are the mechanics of interest rate setting? Who decides which interest rate to charge to whom and how?

Paul Volcker, while chairman of the Board of Governors of the Federal Reserve System (1979 87), was often called the second most powerful person in the United States. Volcker triggered the “double dip” recessions of 1979 80 and 1981 82, vanquishing the double digit inflation of 1979 80 and bringing the unemployment rate into double digits for the first time since 1940. Volcker then declared victory over inflation and piloted the economy through its long 1980s recovery, bringing unemployment below 5.5 percent, half a point lower than in the 1978 79 boom and helping Ronald Reagan convert the American people to Reaganomics. Volcker was powerful because he was making monetary policy. Central banks are powerful everywhere for the same reason, although few are as independent of their governments as the Fed is of Congress and the White House. Central bank actions are the most important government policies affecting economic activity from quarter to quarter or year to year.

Monetary policies are technically demand side macroeconomic policies. They work by stimulating or discouraging spending on goods and services. Economy wide recessions and booms reflect fluctuations in aggregate demand rather than in the economy’s productive capacity. Monetary policy tries to damp, perhaps even eliminate, those fluctuations. It is not a supply side instrument. Central banks have no handle on productivity and real economic growth. A central bank is a “bankers’ bank.” The customers of the Federal Reserve Bank are not ordinary citizens but “banks” in the inclusive sense of all depository institutionscommercial banks, savings banks, savings and loan associations, and credit unions. They are eligible to hold deposits in and borrow from the Federal Reserve System and are subject to the Fed’s reserve requirements and other regulations. The same relationship exists in Canada between the Bank of Canada and the individual banking institutions.

Banks are required to hold reserves at least equal to prescribed percentages of their checkable deposits. Compliance with the requirements is regularly tested, every two weeks for banks accounting for the bulk of deposits. Reserve tests are the fulcrum of monetary policy. Banks need “federal funds” (currency or deposits at Federal Reserve System) to pass the reserve tests, and the Fed controls the supply. When the Fed buys securities from banks or their depositors with base money, banks acquire reserve balances. Likewise the Fed extinguishes reserve balances by selling Treasury securities. These are open market operations, the primary modus operandi of monetary policy. A bank in need of reserves can borrow reserve balances on deposit in the Fed from other banks. Loans are made for one day at a time in the “federal funds” market. Interest rates on these loans are quoted continuously. Central Bank open market operations are interventions in this market. Banks can also borrow from the Federal Reserve Bank at the announced discount rate. The setting of the discount rate is another instrument of central bank policy. Nowadays it is secondary to open market operations, and the Fed generally keeps the discount rate close to the federal funds market rate. However, announcing a new discount rate is often a convenient way to send a message to the money markets.

How is the Fed’s control of money markets transmitted to other financial markets and to the economy? How does it influence spending on goods and services? To banks, money market rates are costs of funds they could lend to their customers or invest in securities. When these costs are raised, banks raise their lending rates and become more selective in advancing credit. Their customers borrow and spend less. The effects are widespread, affecting businesses dependent on commercial loans to finance inventories; developers seeking credit for shopping centers, office buildings, and housing complexes; home buyers needing mortgages; consumers purchasing automobiles and appliances; credit card holders; and municipalities constructing schools and sewers. Banks compete with each other for both loans and deposits. Because banks’ profit margins depend on the difference between the interest they earn on their loans and other assets and what they pay for deposits, the two move together. Thanks to its control of money markets and banks through monetary policy, the Fed influences interest rates, asset prices, and credit flows throughout the financial system. Arbitrage and competition spread increases or decreases in interest rates under the Fed’s direct control to other markets including, of course, real estate.

Luigi Frascati
luigi@dccnet.com
www.luigifrascati.com

Real Estate Chronicle

* Born near Firenze (Florence), Tuscany, Italy in 1955 and immigrated to Canada in 1972. * After graduating in 1978 with a Bachelor of Arts in Economics , I spent eight years in California marketing Italian and American DOC wines for Frascati Wines U.S.A. and imported French champagne under the label ‘Michel Tribaut’ (Ile de Provence). * Returned to Vancouver in 1986 I took my real estate license and joined Century 21 Real Estate the same year. * In 1988 I moved to United Realty (on Kingsway) Ltd. where I practiced real estate for 11 years until the company was sold to Prudential. * In 1999 I joined the Sutton Group of companies, Sutton Centre Realty where I have been successfully practicing real estate ever since.

7 Top Real Estate Investing Jobs

Writen by Steve Majors

Real Estate investing has long been proven to make tons of CA$H for the active investor and many of the real estate investing methods and techniques used to make some of the biggest (and quickest) CA$H only require a little time and a bit of knowledge (i.e., NO MONEY and NO CREDIT!) to rapidly bring home a really big check!

That is the appeal of Real Estate investing courses to most people