How young is too young to be a homeowner? For the minor children of a top-producing Realtor®, you can’t start soon enough.

Cher Castillo began building her real estate savvy when she was an undergrad at the University of Florida in the late 1990s and found a condo she thought was a great buy at only $40,000. But she needed the help of her mother, who was not enthusiastic about the purchase and passed. 

By the time Cher graduated, that little condo had increased in value to $200,000 and she knew her instincts had been correct. She also knew that one day when she had a family of her own she would encourage them to take the leap into homeownership as soon as possible.

That’s how her sons Cruz and Lincoln both became property owners at age 4.

But before sharing her wisdom with her children, Cher first had to build her own knowledge base. She was finally able to buy her first home after graduating and moving to the DC area at age 22 for a job on Capitol Hill. She beat out 15 other offers and paid $150,000 for a Victorian row home in Eckington that was in need of renovations, which she did herself room by room. 

Along the way, she discovered a love for the property development process and making an income in real estate. She sold the home 2 years later for $450,000 and after purchasing two more properties, she opened her own brokerage at 26.

Fast-forward to the present and Cher’s family includes a blended family of six children, all of whom have an interest in real estate. But it’s the youngest who have – quite literally – become the poster children for building generational wealth through real estate.

Cruz, now 14, became an owner at age 4 with the purchase of a property in Baltimore for the nominal amount of $2,500 (which Cher had negotiated down from $10,000) and without yet doing any improvements have already increased in value to $125,000. 

She asked Cruz, now that he owned a property, what he planned to do with it. He answered, “Renting! That way I get money every month rather than selling it and just get money once.” His ability to conceptually understand the complexities of buying and holding real estate impressed Cher, but Cruz took it in stride. “I listen to you all the time in the car, Mom,” he told her.

Not long after the Baltimore purchase, at age 8 he became the face of Cruz Condominiums, a development with three luxury condos in North East DC. “He really got a turn-key experience in terms of developing and selling with this project,” Cher recalls. Cruz accompanied his mom on project development meetings, renovation tours, and open houses, and was featured in all the property marketing. Cher says that he has a large poster of himself and the condos on his wall at home and is proud to show it off to his friends, who are also curious about real estate.

“We lived on the same block that the condos were being built and kids would come by and ask questions,” Cher says. “They would see my name on the sign and wonder what that meant, and I was able to explain how real estate worked.”

Lincoln followed his big brother and bought his first property in Baltimore City as well and went through the purchase process just like any other buyer, complete with a settlement meeting arranged by an attorney friend of the family.

Obviously, the purchase of real estate property by a minor requires responsible adults to navigate the process, but the homes are indeed in the childrens’ name through an LLC that is connected to a trust that the boys will have access to at age 21. “IF they behave themselves,” Cher jokes. She advises that parents or guardians who want to purchase properties in their kiddos’ names should first consult an attorney and an accountant to ensure legal and financial logistics are buttoned up.

Cher also advises having a trusted Realtor® guide the property search and dig for information about what areas are ripe for investment. “Don’t just buy because it’s cheap,” she cautions. “Is it in an area where development is happening? Is there growth potential? Approach it with an investment mindset.”

She also encourages parents and guardians to involve and educate their children throughout the home

-buying process. “If you are going to do this, walk your kids through it from A to Z so they understand all the parts of the transaction,” she says. “Helping them understand the journey is the part that will make them fall in love with the process.”

To that end, Cher is developing a non-profit she calls Young Moguls, aimed at helping 4-17-year-olds learn how to build a real estate portfolio and generate wealth and equity at a young age. 

The most important thing that Cher wants children and the adults who are guiding them to do is not to wait to buy real estate. “If you show them the possibilities of home ownership as early as possible, they won’t be afraid of it in the future.

Cher Castillo & Family

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Buyers’ Agents are getting a lot of attention thanks to a recent ruling on real estate commissions and it’s important to know why they are crucial to selling a home.

Recent signals by the Federal Reserve to cut rates in the new year are expected to usher in an improved market for buyers in 2024. As interest rates continue to decline it will not only increase buying power but it will also increase inventory as sellers who also need to buy are encouraged by lower mortgage rates to list their properties for sale. At the same time, new home builds are increasing as contractors see their building costs decline.

And with more buyer activity, there will be Buyers’ Agents ready to assist them in the purchase of their next home. Recently, there’s been an intense focus on buyers’ agents’ commissions, thanks in part to October’s Stitzer-Burnett antitrust judgment, which found that the National Association of Realtors® (NAR) and several large real estate franchisors conspired to inflate commissions. The jury awarded damages of more than $1.8 billion and the verdict is being appealed even while similar cases are being filed throughout the country.  

It’s a developing story and one that has many perspectives – sellers, buyers, brokerages, and Realtors® – in the mix. But it’s buyers’ agents who will be key to helping navigate the debate for their clients.

Very simply, a Buyer Agent is a Realtor® or licensed real estate agent who represents the interests of a buyer in a sales transaction. Buyers don’t have to use an agent to buy a home, but most benefit from the knowledge, contract expertise, negotiation skills, and helpful connections during the transaction and beyond that a professional Realtor® provides. 

In our region, a Buyer Agency Agreement is usually the first time a client learns what their agent will do for them during their home purchase process. It outlines the tasks an agent is required to perform as well as what the buyer is responsible for and includes a paragraph about how the Buyer Agent is paid. These agreements have been used in real estate since the 1990s and help ensure that all parties understand the agency relationship – including loyalty to the client, confidentiality about the information shared, fiduciary responsibility, and required disclosures – and offer clients the opportunity to ask questions and negotiate terms before a home search begins. 

But the most important assurance the Buyer Agency Agreement offers is that a client can trust that their agent will represent them to the fullest extent and put their interests first. The seller has their own agent negotiating on their behalf so it makes sense for a buyer to avoid any conflicts of interest by also having their own representative – their champion! – during the sale. In short, a Buyer Agency Agreement ensures transparency and accountability for everyone involved.

Like buyers, sellers can represent themselves, but most hire a real estate professional to list a property and protect their interests during the transaction. In the Washington, DC metro area, the majority of homes are sold with agents, and commissions from these sales are paid to brokerages, most of whom have affiliated agents as independent contractors.

Traditionally, sellers have paid both their listing agent’s fee/commission and that of the buyer’s agent (also called a co-op fee) for bringing a qualified buyer and managing the transaction to settlement. How much commission a seller chooses to pay, and whether to offer a co-op commission, is always negotiable. These fees are disbursed at settlement, meaning both the seller’s listing agent and the buyer’s agent get paid at the end of the transaction. In the meantime, both agent sides are incurring business and operating costs that they will pay with the commissions they eventually earn from their brokerages.

One of the arguments in favor of co-op fees is that it helps buyers’ purchasing power. If buyers were required to pay the agent’s fee it would greatly reduce buying power, adding commission expense on top of hefty down payments, closing costs, and inspection fees. This would significantly impact first-time, FHA, and veteran (VA) buyers, especially those with limited equity and generational wealth. Rising home prices have already kept many of these buyers on the sidelines and could exclude an entire group of would-be homeowners. Many in the industry worry that buyers will instead choose to be unrepresented in a transaction rather than hire an agent, opening themselves up to being at a disadvantage during negotiations, inspections, deadlines, and appraisals.

While the co-op fee is at the heart of the debate in the NAR and brokerage lawsuits, it doesn’t take away from the expectation that professionals like Realtors® should be paid fairly for their work in representing their clients and their clients’ goals of homeownership. The question of who will pay for that compensation is one of the most hotly debated topics in real estate right now and will be for some time to come.

Don’t be afraid to ask your agent about commissions and how they may affect your home purchase. A professional McEnearney Associates | Middleburg Real Estate | Atoka Properties agent is ready to answer all questions, provide guidance and clarification, and get to work representing you!

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Homeownership is not for everyone. Is that a bad thing and what does it cost in the long run?

There are times when homeownership makes sense, but is this one of those times? For many, the combination of inflation, high interest rates, and steadily increasing home prices has put homebuying plans on hold, especially for Millennials and Gen Z buyers who have less purchasing power due to lower incomes, more debt, and less equity.

In a pricey area like ours, the pinch is even worse. The DC area’s cost of living was reported this spring to be 53% higher than the national average, while the housing portion of overall costs was a whopping 144% higher. Combined with a growing population that hasn’t kept pace with housing inventory, the supply-and-demand pressure continues to keep rents high, although there are some signs the climb may be leveling. In August it was reported that the average monthly rent in DC was $1,901/month, Virginia was $1,594, and Maryland was $1,741.

About 40% of the DC metro area is made up of renters and a growing number of them report spending more than half of their monthly income on rent. A November report from Virginia Association of Realtors showed that compared with homeowners, renters are carrying more than two times higher housing costs. Data from the Census Bureau indicates that as of 2022 about 50% of renters were housing cost-burdened in Virginia, while only 20% of homeowners were housing cost-burdened (meaning 30% or more of monthly income was going toward housing costs).

But even with the financial burdens that renting can bring, it may actually be better for some in the long run to stay in tenancy. Because while rental prices have climbed, so have purchase prices. High list prices coupled with high interest rates mean it now costs 52% more to own a home than to rent.

The podcast The Daily from The New York Times covered this recently and reviewed the financial paths that buyers and renters take on the way to building wealth. On one path, renters hold off on buying and investing what would have been a down payment in another way; as the investment grows the renter can increase their buying power for a time when overall housing costs may be lower. On the other path, homeowners navigate the initial high costs of buying a home and are rewarded (eventually and hopefully) with equity that grows over years of ownership.

Here are a few things to consider when deciding which is the better path for you right now. Because the market can and will shift, and “timing the market” is almost never a successful strategy.

How long do you plan to stay in the home?

If it’s less than 5-7 years, it makes more sense to rent and invest cash elsewhere. Use a rent ratio calculator to determine your relative cost of renting versus buying.

How steady is your income?

Annual rent increases can be unpredictable and plenty of tenants have been surprised by a sudden unexpected hike. For the most part, mortgage payments are consistent over the term of the loan (allocating for increases in taxes, insurance, and amenity fees) and easier to budget around in the long term. 

What is your budget (or patience!) for home repairs?

As a renter, home maintenance costs are borne by the landlord. If something goes wrong, you pick up the phone and someone else takes care of it. As a homeowner, you can expect to pay about 1% of the home’s purchase price every year toward home maintenance. But there are also big-ticket repairs – like a new roof, appliance upgrades, and systems repairs – that will unexpectedly take a bite out of your budget.

What is your lifestyle?

Do you like exploring new neighborhoods? Are you a traveler and want the flexibility of trying on a new city for a while? Could a major life milestone be on the horizon? Do you simply want a low-maintenance living situation? Renting offers many benefits for people who don’t want to be tied to the responsibility of paying for and maintaining a home.

The National Association of Realtors has many resources to help decide if homeownership is the right move and where to find first-time homebuyer assistance, as well as reporting relevant data to understand current market dynamics.

And, when you’re ready to find a fantastic new rental or take the first step toward homeownership, be sure to connect with an amazing agent at McEnearney Associates!

Take a look at our website for all of our listings available throughout Washington, D.C., Maryland, and Virginia.

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