Money Management

Selling a home without the help of a real estate agent could save you money — or cost you money. Read on to learn more. 

These days, sellers continue to have the upper hand in the real estate market. Even though buyer demand has waned on the heels of higher mortgage rates, sellers can take advantage of the fact that housing inventory is low on a national scale.

As of the end of March, there were only 980,000 housing units for sale across the U.S., reports the National Association of Realtors. That represents a 2.6-month supply of homes. And it normally takes up to a six-month supply of homes for there to be enough inventory to meet buyer demand in full.

If you’re looking to sell your home, you may be thinking of doing so without the help of a real estate agent — given that it’s still a seller’s market. But you should know that going this route has its pros and cons.

The upside of selling a home without a real estate agent

When you hire a real estate agent to sell your home, you lose money in the form of their commission. Redfin says the typical real estate agent commission is 5% to 6% of the sale price of your home. And to be clear, it’s you, the seller, who pays that fee — not your buyer.

So, let’s say you’re selling your home for $500,000. A 5% real estate commission would have you losing $25,000, while a 6% commission would have you losing $30,000. These aren’t small amounts of money, and you may not want to give them up — especially if you’re selling your current home so you can upsize to one that’s more expensive.

The downside of selling a home without a real estate agent

You might save yourself some money by forgoing a real estate agent when selling your home. But what you save by not having to pay a commission, you might lose in the form of a lower sale price.

One thing real estate agents tend to be really good at is setting optimal prices for homes and negotiating with buyers and their agents. So going back to our example, selling your home solo might give you $500,000 for it. With the help of a real estate agent who can also market and stage your home, you might be looking at $530,000 or $540,000.

Also, selling a home can be stressful. There are offers to review, negotiations to handle, and open houses and viewings to coordinate. These are all things that a real estate agent can handle on your behalf. Do them yourself, and you may find that the process of selling your home is overwhelmingly stressful.

Should you sell your home without a real estate agent?

In today’s market, you really could go either way. It’s easy to make the case that since inventory is so low, it doesn’t pay to lose money to a real estate agent commission. But just know that hiring a professional to sell your home could still benefit you financially, even if you end up having to pay them a fee.

Also, think about how much time you have to dedicate to the home sale process. If you work a demanding job, you may want to get a real estate agent’s help so you’re not forced to juggle too much at once.

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The huge network of banks in the U.S. means even small niches of customers can access the services they need. Find out how small banks play a big role in the economy. 

With over 4,100 banks, the U.S. has more banks than any other country in the world, many of them small- and medium-sized institutions. And that huge network forms a crucial part of the financial system. Why? In short, they are part of our communities. They often cater to customers who might not otherwise be able to access financial services. They also offer more consumer-centric services and play a valuable role in the economy.

Unfortunately, those banks are under pressure. The impact of COVID-19, aggressive interest rate hikes, changing technology, and — most recently — the collapse of SVB, Signature Bank, and First Republic, have all added to the strain. As customers withdraw their deposits on fears of further failures, it becomes more difficult for smaller banks to survive. Let’s dive in and find out why they matter.

1. Smaller banks are often more customer centric

The great thing about having thousands of banks is that it means each person is more likely to find a bank account that suits their needs, whatever those may be. There are all kinds of reasons we don’t always fit in life’s boxes. It could be because of where we live, religion, race, lifestyle, work, home situation, or something else entirely. Since systems at bigger banks tend to be skewed toward a particular idea of what’s normal, those smaller banks fill in the gaps and make banking more accessible.

Take the Bank of Bird-in-Hand and its customers, recently interviewed by NPR. The bank offers special loans for Amish homes and farms and has all kinds of facilities that address its customers’ specific needs. Or the Bank of Delight in western Arkansas, interviewed by the Financial Times, which services local logging and farming businesses. The insights these banks have into their customers and their lives means they are uniquely placed to offer loans and financial services. If those banks crumble, so could some of the communities and businesses they support.

2. Small banks are important for the economy

According to Goldman Sachs, small- and medium-sized banks account for around half of commercial and industrial lending in the U.S. In terms of residential real estate, they give out 60% of home loans. And if you’re in the market for a personal loan, know that smaller banks are behind 45% of consumer lending. The Financial Times says small banks finance small businesses that account for nearly half the economic activity in America.

If those banks fail or don’t have the deposits to support the current levels of lending, it has a knock-on effect to American businesses and our personal finances. Loans will be harder to get, we’ll need to pay higher interest rates, and the economy may suffer. Against a backdrop of recession fears, the survival of small banks and the businesses that use them becomes even more important.

3. There’s a danger to allowing big banks to get bigger

In 2008, the failure of banking giant Lehman Brothers put enormous pressure on the banking system and wider economy. We learned a lot about institutions that are too big to fail, and the damage that can be done when one giant tumbles. This is what’s called systemic risk, and there are a number of regulations in place to ensure the Lehman situation does not repeat. Sadly, what SVB has shown us is that even mid-sized banks can cause serious ripples when they fail.

Some argue that economies of scale mean bigger banks are more efficient, while others think monopolies in banking can lead to higher prices for consumers. Essentially, if a handful of banks control most of the industry, it is easier for them to hit consumers with extra banking fees and charge higher rates on borrowing. At the same time, bigger banks are better positioned to offer large ATM and branch networks and reduced fees on international transactions.

Bottom line

If you use one of the thousands of smaller banks that make up the U.S. system, you’re likely already aware of why they matter. Even so, the fears around the banking system may also make you wonder about moving your funds to a bigger bank. It’s understandable, even if you know that FDIC insurance covers up to $250,000 per bank, per customer, per account type. Nobody wants to risk their savings in a bank failure, but if SVB’s contagion continues to slow, America’s remaining small banks may make it through this latest crisis.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.

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Caleb Hammer, a financial YouTuber, has tips for those with maxed-out credit cards and thousands in debt. Read on to find out what he advises. 

Credit card debt can easily take over your life and leave you struggling financially. If you find yourself with maxed-out credit cards and thousands of dollars in debt, you are not alone. And thankfully, there are ways to get out of this situation. Finance YouTuber Caleb Hammer, helps people get out of debt via his show, called Financial Audit. In a recent episode, a 27-year-old married man named Johnny called into the show, asking for advice on how to pay off $35,000 of debt on eight maxed-out credit cards. Here is Hammer’s advice and whether it’s worth following if you’re also trying to get out of debt and get your finances in order.

Don’t be a “credit card” person

Caleb Hammer’s first advice to anyone dealing with credit card debt is to stop treating themselves as “credit card people.” Johnny had spent $748 on overdraft fees so far this year, and including money owed on his car loan, was in just over $35,700 of debt with minimum monthly repayments of about $1,000.

With Johnny and his wife in a vicious cycle of paying off cards then getting into debt again, the only ones benefiting were the credit card companies. Credit card companies make money by luring people into debt with convenient access to money and attractive offers and rewards. This can lead to a cycle of overspending.

Hammer recommended that the couple tell themselves they were “not credit card people.” Credit card people let the system take advantage of them. By acknowledging that they are not “credit card people,” Johnny and his wife can distance themselves from the temptation of overspending on credit.

Hammer also suggested that Johnny cut up the credit cards and never use them again. This may seem drastic, but it can be an essential step to breaking the cycle of overspending and accumulating debt. Without the credit cards, Johnny and his wife will have to learn to live within their means and only spend what they can afford. It may be tough at first, but it will be worth it in the long run. Credit cards can be a secure and convenient way to make purchases, but if you’re struggling with debt, it might be worth it to take a break from them.

Use the snowball method

The snowball method is another strategy that Hammer suggests for paying off credit card debt effectively. This debt payoff method involves paying off the smallest debt first and then moving on to the next smallest one, regardless of the interest rate. By doing so, Johnny and his wife can see progress and feel a sense of accomplishment with each debt paid off. This momentum can keep them motivated to keep going and eventually pay off all their debts.

Managing debt can feel overwhelming, In addition to the snowball method, there are several other options you can use. The debt avalanche method is where you focus on high-interest debts first before tackling lower interest loans. Debt consolidation is also a popular option, where you combine multiple debts into one monthly payment with a lower interest rate.

Whatever option you choose, it’s important to have a solid plan and stick to it in order to reach your goal of becoming debt free.

Stick to a budget

In addition to using the snowball method, Hammer recommended that Johnny and his wife look for ways to reduce their expenses and increase their income. They can cut back on non-essential expenses like dining out, entertainment, and shopping. Hammer laid out a recommended budget for Johnny and his wife, which left $1,010 a month to pay off their debts. By sticking to it, they could be debt free in a year and a half.

If you’re learning to budget, it can be helpful to identify the root cause of your financial struggles. Why did you get into debt in the first place? Was it due to overspending or an unexpected emergency expense, or did you just lack a financial plan in the form of that budget? By understanding what led you to your current financial situation, you can create a plan to avoid making the same mistakes in the future.

Once you know how you got into trouble, it can help make sticking to a budget much easier. Budgeting apps can also streamline the process and give you encouragement along the way. Apps like Mint and Rocket Money allow you to link your bank accounts in order to get an overview of your finances. The insights provided by these apps are invaluable when it comes to money management. For example, they can show you which areas of your spending could use improvement, where you’re wasting money, and how much money you can save by cutting back in certain areas. While it can be difficult at first, sticking to a budget will help you pay off your debts while meeting your other financial goals.

If you are in a similar situation with maxed-out credit cards and lots of debt, it’s essential to take immediate action to get out of it. Following Hammer’s advice can be a great start in breaking the cycle of overspending and debt, and check out the other recommendations above, like different debt payoff techniques and budgeting apps. Remember that getting out of debt takes time and effort, but it’s worth it in the end. Ultimately, paying off debt can help you get your personal finances in order and achieve financial freedom!

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Mortgage rates have been stuck in the 6% range. Read on to see why a refinance could still make sense. 

Mortgage rates have been stuck in the 6% range since the start of 2023 for 30-year loans. And as of May 4, the average 30-year mortgage rate was 6.39%, according to Freddie Mac.

Because mortgages have gotten expensive, you’ll generally hear that now’s not a great time to refinance. And for many homeowners, that advice is spot-on. But here are a couple of reasons why you may want to refinance your mortgage, even with rates being above 6%.

1. You’re paying way more than 6% now

Today’s borrowing rates for mortgages seem high because in 2020 and 2021, borrowers got used to record-low rates in the 3% range or below. But historically speaking, borrowing for a home in the 6% range isn’t so bad.

What’s more, if you signed your mortgage a number of years back and your credit score wasn’t so great at the time, you may have gotten stuck with a mortgage in the mid-7% range, or even 8% or more. So in that case, refinancing to a new mortgage with a rate of, say, 6.39% doesn’t seem so terrible.

2. You want to take cash out of your home

The Federal Reserve has been raising interest rates, so these days, it’s expensive to borrow money no matter how you go about it. However, you might snag a lower interest rate on a mortgage refinance than on another loan, like a home equity or personal loan. And so if you need to borrow money and want to take cash out of your home via a cash-out refinance, then it could pay to do so even if it means locking in a new home loan in the mid-6% range.

With a cash-out refinance, you don’t just swap your existing mortgage for a new one. Instead, you borrow more than your remaining mortgage balance and get the difference in cash. You can then use that cash any way you see fit.

Right now, you might pay 6.39% on a cash-out refinance for a 30-year mortgage. By contrast, a lot of personal loan lenders are charging between 7% and 9% these days, which is a higher rate than what you’d get by refinancing your mortgage.

Should you refinance this year?

Let’s be clear. For many homeowners, it absolutely does not and will not make sense to refinance a mortgage in 2023 (assuming rates stay where they are today for the rest of the year). This especially holds true given that so many homeowners refinanced their mortgages in 2020 and 2021, and are now sitting on super low rates.

But there tend to be exceptions to every rule. And if one of the above circumstances applies to you, then a mortgage refinance at over 6% interest could still be a savvy move.

That said, given where mortgage rates are today, it’s important to go into the refinance process with a great credit score. Doing so increases your chances of getting the most competitive interest rate a given lender has to offer — even if the baseline is pretty high.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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