Contingencies and House Offers: What You Need to Know

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Just like everyone talks about the excitement of college but not the uncomfortable dorm beds, just like people say they had a “great time” at Thanksgiving but skip the part where Aunt Tonya said the government was spying on her, contingencies are an often unmentioned—but highly important—part of the home buying process.

Except unlike those aforementioned scenarios, contingencies are a good thing. They protect you in the process of buying a home, which is likely the biggest financial investment you’ll make in your lifetime. Take a look at how contingent offers on a house work!

Types of Contingencies

Getting your offer accepted feels amazing, but before you officially seal the deal,, you want to make sure you’ve covered your bases. There are three main types of contingencies that people include in their written offer:

Financing

Pre-approval on a loan does not guarantee approval for on your actual loan application. The bank might not agree with the house you chose, or their appointed appraiser might find the home’s value at less than what you’re asking to borrow. If you include this contingency into your offer, you’ll be able to back out of the contract.

Home Inspection

Home inspections examine the condition of a property and inform you of any issues. They happen after your offer is accepted, which is why you want to make the sale contingent on the inspection results. Minor bathroom fixes may only be $100 or so; cracks in the foundation are another story.

If you don’t include inspection contingencies in your offer, you’re agreeing to accept the home as-is. This adds risk to your investment—you could end up spending thousands on previously unnoticed repairs. However, people who invest in real estate and flip houses purposely accept a home as-is so that they can close faster and start renovating. 

Needless to say, you have options with home inspections when making a contingent offer on a house. The best thing you can do is to make this contingency decision with intention and in alliance with your needs.

Home Sale

First-time property owners won’t have to worry about this one, but it’s good to know all the same. If you currently own a house and are worried about it selling in time for closing, make a contingency that buying a new house depends on the sale of your existing home. But be wary of this contingency—today’s market is highly competitive. Your offer could be rejected if a home sale contingency is in place.

Writing Contingencies

There’s a delicate balance to writing contingencies in your offer. On the one hand, you want to protect yourself as you move forward with this massive investment. On the other, your contingencies (depending on what they are) could leave your letter of offer repeatedly rejected.

Sellers may get several offers; they may even get dozens. You’ll want your offer to stand out, but you won’t want to compromise your finances in the process.

Banner with white man standing in front of house with text "Buy. Sell. RealtyHive."

That’s the great thing about working with RealtyHive. Sellers don’t have to worry about contingencies when selling at a time-limited event, and can even end up with more offers. Look for your next home or sell your current one with RealtyHive. We’ll help you navigate!

How to Effectively Screen for Quality Tenants

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Every landlord wants good tenants who pay their rent on time, do not cause any trouble, and take care of the place as if it belongs to them. However, getting good tenants require effort and time. As a landlord, if you do it properly, you will be able to avoid complications and problems in the future. In the long run, you get to save time and money, while renting your property to high-quality tenants.

Here are some tips to effectively screen for quality tenants:

1. Do Not Rush

To get a high-quality tenant, the first thing you should do is to take your time and don’t rush into renting your property. Carefully screen each applicant, and whenever possible, meet them face to face.

A one-on-one meeting will provide you with a great deal of insight into the individual. Even if the applicant has been referred by someone or through other tenants, you should still screen them properly. Keep in mind that a hasty decision can prove to be a big mistake when it comes to tenant screening.

2. Hire the right Property Management Company

If you feel that you are not able to adequately screen prospective tenants because of your other obligations or for any other reason, it’s a good idea to hire a professional property management company,” according to UpkeepMedia.com, a marketing firm with an extensive history in real estate and property management.

A property manager will not only help you market your property and find new tenants, but they will screen them effectively for you. Most property management companies know exactly what is involved in the screening of tenants, and they will do all the hard work for you in exchange for a small fee. If you don’t have the budget, you can do it yourself but make sure you give this task some time and effort.

3. Use Application Forms

Before you rent out your place, make sure every potential tenant completes an application form. You can download free sample rental application forms or make your own.

The application form must cover everything that you need to know about the tenant such as their date of birth, financial information, place of employment, whether they are smokers or non-smokers, whether they have pets or not, their previous residence, social security number, phone, references, and marital status.

The application must state that a criminal and background check will be done so that the applicant can give you the authorization to proceed. As a landlord, it is your responsibility to verify the data in the application.

It’s important that you not only rely on paper references. Do the legwork and call the previous landlord and present employer to verify the facts. If the application has any missing information, ask the applicant. If they do not provide the information you need, proceed with caution.

4. Do a Credit Check

Many states permit the landlord to charge the prospective tenant a small fee for conducting a background and/or credit check. But there are some states that do not allow you to charge the tenant.

Check the laws in your state to be sure. In any case, check the credit score of the tenant and look at their history of late payments, bankruptcies, debts, and so on.

5. Run a Background Check

A background check must be done for all applicants. For a small fee, you can get a lot of detail about the prospective tenant’s past history, including any prior convictions, eviction history, and credit history. All you need to do is order a background or credit check. Evaluate this information carefully and then make your decision.

6. Speak to the Previous Landlord

Your tenant applicant should require the applicant to provide information about their current and previous landlord. But this is not just information that you just file away. You should call the landlord and get feedback on the quality of the tenant. You should verify if the rent was paid on time, why the tenant was moving, and if there was any property damage or other issues.

7. Verify Employment

In order to verify if the applicant has a steady income, you should also speak to their employer before you approve or reject them. You can either contact the employer directly or ask the tenant to supply you with a few recent pay stubs.

In most cases, if you call the employer, they will not divulge the salary but will confirm if the applicant is under their employ.

8. Speak to the Applicant

Conduct a personal interview with the prospective tenant. These are some questions that you can ask. Make sure that any additional questions you ask comply with the Fair Housing Act to avoid any discrimination:

  • Do you smoke?
  • Do you have any pets?
  • What is your regular workday like?
  • How long do you plan on staying?

Screening prospective tenants is a worthwhile effort if you do not want to get stuck with poor quality tenants. Proper screening does not mean you break any privacy laws or reject people on the basis of their race, background, or ethnicity.

The only thing you need to do is evaluate their financial situation, background, and employment status. The goal is to find a tenant who will take care of the property, pay their rent on time, and stay long-term.

About the author (UpkeepMedia.com)

Alexander Hassoulas is a digital marketing consultant and co-founder of Upkeep Media Inc. Upkeep Media specializes in working with the real estate industry to improve their online presence through SEO, Paid Ads, Content Marketing, Website Development and Reputation Management.

Everything You Need to Comfortably Enjoy Summer from Home

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Now that we’re in the thick of summer, and what tends to be the hottest month of the year is upon us, it’s time to prepare for the coming heat if you haven’t already. Throughout our lives, we look forward to summer. Whether as kids longing for the break from school or as adults craving the warmth of the sun and excuse to go on vacation, summer is a time to be enjoyed. But what about when the heat gets to be too much? That’s when you need to take a look at your home and make the necessary improvements to make summer living comfortable. 


Upgrade your cooling system


Air conditioning is without a doubt one of our most sacred modern blessings. Few things feel better than the blast of cool air when coming in from the heat outside. But you also have that nagging voice of your parent or grandparent in the back of your mind telling you that running the A.C. is going to raise your energy bill. While it’s true that HVAC systems use up a lot of energy, newer models are more energy efficient and can do the same work while reducing your monthly energy payment. Do some research on if you should consider upgrading your HVAC unit and then consult with a certified technician on what option will work best for you.


Furnish your basement, plus upgrade your home value


If your home has a basement, it’s a great idea to make sure it’s furnished. Basements provide you with a naturally cool place to spend time when it’s warm outside because they are underground. Not only will the project of finishing your basement keep you cool, it will also add value to your home. So not only are you getting a literally cooler place to spend time, but the investment you put towards transforming the space will help you to profit in the future. 


Create the perfect sleeping environment


No one wants to be hot in their sleep. It’s just plain uncomfortable, and it makes it much harder to get your rest. That’s why, especially during the warm summer months, it’s extremely important to make sure your room is your ideal sleeping temperature. This means lowering your set A.C. temperature at night and, just in case that doesn’t cut it, keep a fan at your bedside. Take things a step further by purchasing a new mattress, potentially one with cooling technology to regulate your temperature while you sleep. 


Have ways to keep cool outside


During those long and cold winter months, you long for days spent outside in the warmth of the sun. When the heat and humidity come you feel like you need to soak it in as much as possible and don’t want to complain, but it can also be too overwhelming sometimes. Believe it or not, there are options to help keep you cool when outside as well. Make sure your backyard has some sort of shaded area, whether it’s natural or achieved by your addition of a covered patio. This way you can enjoy the warmth without being in direct sunlight 24/7. Add a misting fan to your shaded area for another layer of cooling.


Make use of simple techniques to keep cool air inside


When spending your hard earned money on keeping your home cool, the last thing you want to do is cause your HVAC unit to run more than it has to. Keep an eye on your local forecast and if it’s going to be especially hot, do not introduce warm air into your cool environment by using your stove/oven. Plan ahead and premake meals you can warm in the microwave or eat cold. You also want to keep the sunlight and heat out of your space as much as possible. While under door draft stoppers are popular in winter months, they can also be used in the summer to keep warm air from entering your home from underneath your exterior doors. You should also hang blackout curtains and keep them closed to prevent heat and warm sunlight entering through your windows.

We look forward to the warmth of summer all our lives. Don’t let the sun become too much for you and make sure you have a retreat from the heat. You shouldn’t have to venture out to stores and restaurants to seek solace. Instead, make sure your home is the place you find comfort no matter the weather.

Little girl playing with a sprinkler

5 DIY Backyard Games For the Summer

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Summertime is a time to kick back, relax, and enjoy life. And where is the best place to do that? The backyard of course! This summer, take your kids to a waterpark, a carnival, or a beach without ever having to leave the lawn! Here are 5 fun ways to spend your summer in the backyard.

  1. Play a Game of Kubb

Little girls hand about to pick up a wooden baton

If you want to know how to play Kubb–also known as Viking Chess–imagine a lawn game that’s a combination of Horseshoes and Bowling. The objective is to knock over 5 wooden blocks with wooden batons, before your opponent does. You can play one-on-one, or on a team. Although, speaking from personal experience, playing on a team is much more fun!

If you want to learn more about how to play Kubb, and how to create your own game, check out HerToolBelt.

  1. Set up a Trampoline

Little girl bouncing on a trampoline

Having a trampoline is every kid’s dream. I remember when I was younger, we didn’t have a trampoline but we’d jump–no pun intended–at the chance to use one whenever we could. There’s just something so cool about the feeling of bouncing high in the air, doing flips and tricks that you’d never be able to achieve on the ground.

Learn how to construct your own trampoline Here. 

  1. Turn the Garden Hose into a Sprinkler

Little boy jumping in a sprinkler

I remember when I was younger, mom or dad setting up the sprinkler in the yard was the official start of summer. As a kid, there’s nothing better than running across the yard and leaping through the water fountains in the air. Who needs a pool when you can have an entire waterpark!

There are plenty of different ways to create a sprinkler for the kids. To learn about some of them, visit: ComeTogetherKids.com

  1. Create a Game of Lawn Twister

Cans of red, green, and blue spray paint

Twister is a game that everyone has played at some point in their life. Whether it be at a slumber party or at a sleepover, we’ve all had the experience of trying to twist all around while making sure we’re still in the game. This summer, make your Twister experience even more far-out by spray-painting your own mat in the backyard! It’s super fun to make, even the kids will want to get in on it! And best of all, its temporary. You don’t have to worry about ruining the lawn because the paint washes right off with water.

To find out how to create an outdoor Twister board, visit SheKnows.com. 

  1. Construct an Outdoor Firepit

Logs burning in a fire

Is there anything better than sitting around a campfire with your friends and family, roasting hotdogs and marshmallows, and enjoying a beautiful summer night? The answer is no, no there is not. This summer, you can have a campfire right in your own backyard!

The easiest way to build a fire pit is to find a spot in your yard to place it–probably somewhere there’s a lot of empty space. You can figure out how wide you want it to be, and dig a hole about a foot deep. Then, all you have to do is place bricks or larger rocks around the whole, and Voila! You have your very own firepit!

For further instructions on how to create an outdoor firepit, check out Zillow.com. 

house for sale sold right price

What’s in a Price? How to Properly Price Your Property!

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Properly pricing your property is arguably the most important step in selling your real estate. While this can be a challenge in a changing market even for seasoned real estate professionals, those who decide to sell their property themselves can feel completely lost. If you price too low, you’re leaving money on the table that you could use for your next purchase, but if you price it too high, it’ll take longer to sell than you want. How can you figure out the price that’s just right.

Take a Step Back
One of the biggest mistakes people make in properly pricing real estate is being too emotionally close to it. If you’re putting your childhood home, a family estate, or even your first real estate purchase up for sale, there’s a good chance you’re going to feel a lot of emotions. While this is completely expected, you’ll need to be able to put your feelings aside to find the right price for your property. While you might see the charm and character of a property, it’s important to be objective in your assessments. Are your fixtures truly character pieces or are they outdated? Is your home quirky or full of code violations? Don’t let your personal history and good memories of the property increase your perceived value.
Questions to Ask: What are the true “pros” of this property? What are the true “cons”? If I didn’t know what this property was originally purchased for, what would I pay for it now?

What’s Your Timeline?
It’s a well known fact in the real estate industry that everything will sell eventually. The key behind that wisdom is that most people can’t wait for “eventually” to happen. In most cases, people tend to sell one property to buy another or otherwise make arrangements where holding on to a property for no reason other than they can’t find a buyer just isn’t feasible. While you don’t need to price so low you’re giving the property away, a more modest markup will help to move the property more quickly.
Questions to Ask: When do I want/need to move? What costs will I incur if I don’t meet this deadline (taxes, maintenance, HOA dues, etc)?

Take a Look Around
One of the easiest ways to see what your local real estate market is like is to take a walk around your neighborhood. How many properties are currently for sale? How long have they been for sale? If you’re seeing a lot of “For Sale” signs, but they’ve been around for weeks that will indicate you may be in a cool market. On the flip side, if you’re seeing a real estate agent’s sign for a few days and then they go away, you know you’ve got a hot market on your hands. If properties are flying off the market in your area, it’s a pretty safe bet that you can list your home for a premium price and will probably still see great activity.
Questions to Ask: Is there a lot of this type of property in my area for sale? How long are these properties staying on the market? How does my property compare?

Location, Location, Location
It may be cliche, but the location really is (almost) everything. Property that is landlocked, full of wetlands, or uniquely zoned is going to be valued at a much lower price by potential buyers than a property that is free from restrictions or technicalities (like easements). Additionally, the surrounding area can have a large impact on correct pricing. You can have the nicest home on the block, but if the neighborhood isn’t desirable, the property won’t be able to garner as high of a final sales price as the same home in a better location would.
Questions to Ask: How would you rank the location/area of this property? How does this particular property compare to others around it?

Doing your research is important when it comes to selling your real estate. While public records and real estate listing websites can provide a wealth of knowledge, it may be wise to talk with a licensed real estate professional who can assist with the full sales process from pricing to negotiations to closing. Interested in selling on your own? Talk with a RealtyHive representative today on how to Create Your Best Chance to Sell!

meeting recruiting business

Successful Brokers Leverage RealtyHive for Recruiting and Revenue

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Attracting and retaining talented and top producing agents is one of the biggest challenges faced by brokers today. With franchise, boutique, and online brokerages competing for the same pool of talent, what can a broker do to stand out above the rest and attract the best agents? Longtime brokers from across the country have found success by offering something their competitors do not– a platform that helps combat some of the biggest challenges faced by agents and helps them sell more properties.

Howard Lein, broker and owner of a large real estate brokerage in Arizona has seen the positive impact of doing just this. While Lein engaged with RealtyHive more than a year ago with the intention of creating global exposure on his firm’s listings, he found that being able to offer something the other brokers in the area didn’t helped him to recruit new agents.

“One of the tools that RealtyHive provides us comes in the form of a recruiting edge. Every market has forever had hard-to-sell properties. At the same time, agents are searching for costly “shiny objects” that will give them a leg up in a listing presentation,” said Lein. “No matter the price range or the product (commercial or residential), I find that the RealtyHive conversation can be a game changer in a recruiting interview. It gives the recruit a marketing edge to either keep and sell their hard-to-sell listing or move into a new marketplace with a solution nobody else is adept at or even offering. Best of all, neither the agent or their clients need to lay out money to get into the program. I really like the program. I am most disappointed when I forget to talk about it in an interview!” he continued.

Lein isn’t the only broker who has seen the power of the RealtyHive platform. Across the country, Washington D.C.-area broker Tom Donegan has found RealtyHive to be an innovative solution to help his agents capture and retain more listings, as well as serving as a recruiting tool. “Brokers are always in need of additional revenue and [the RealtyHive] system makes it painless,” he said. “There are hard-to-sell properties in every market. I believe an agent can easily develop a script to contact expired listings using [the RealtyHive] system and generate more income.” Donegan continues, “We’re in a very difficult time in the real estate industry, where disrupting forces are significantly impacting a small brokerage’s ability to be profitable. RealtyHive will be my disruptive force in our Northern Virginia market.”

The RealtyHive platform was crafted and perfected to give brokers these exact advantages. From serving as a listing extension resource to a recruiting tactic and so much more, RealtyHive gives brokers the ability to increase market share, recruit top talent, and add 1,000s of closed properties to their system. More information about RealtyHive can be found by watching the attached video. To learn more about partnering with RealtyHive click here.

money-currency-crypto-cryptocurrency-bitcoin

The Future is Digital: Countries Exploring Digital and Crypto Currencies

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There’s a lot of buzz around all things crypto these days and while many people have heard about Bitcoin and Ether, there is still a lot of misunderstanding. To add to the confusion, new forms of currency, usually referred to as tokens or coins, are added almost daily. While many of these are done by private parties or organizations, some federal governments are looking to get into the mix for a variety of reasons from privacy to efficiency.

Before digging into which countries are pursuing which types of projects, it’s important to understand the difference between digital and cryptocurrency.

When a person uses a debit or credit card, they are using digital currency. These days most businesses, organizations, and individuals have little to no problem accepting digital currency as this form of payment is now widespread and normalized. When credit cards first rolled out in wide scale, the reaction was similar to the current skepticism surrounding cryptocurrencies as people were accustomed to exchanging physical objects (money) for goods and services. After seeing how mainstream digital currencies have become, and the efficiencies they afford, some governments have taken to producing their own systems. Keep in mind that not all digital currencies are cryptocurrencies (but they could be), but all cryptocurrencies are digital currencies.

Cryptocurrencies are receiving a ton of attention now, but they are a bit more complex. Instead of having a centralized, well-known company, like Visa or Mastercard, handling the transaction and verification process. Instead, the verification (aka proof that a person has the money they’re trying to spend) is done through a complex web of connected computers called a blockchain.
 


 

Countries Exploring Cryptocurrencies

Marshall Islands
The Marshall Islands, a nation of volcanic islands situated in the Pacific Ocean between Hawaii and the Philippines, has done away with the U.S. dollar. A bill signed into law on March 1, 2018, changed the official currency of the nation from the USD to the “sovereign”, the country’s new, official cryptocurrency. By transitioning to digital currency as the sole form of national legal tender, the country and its population of more than 53,000, is creating an interesting scenario for banks and credit card companies who will have to use this system if they are interested in doing business in the country.

Venezuela
In early 2018, Venezuelan President Nicolas Maduro announced the release of the Petro, a new digital currency back by the country’s vast oil reserves. While Mr. Maduro touted this move as a workaround to existing U.S. sanctions, however shortly after the Petro was released, U.S. President Donald Trump signed an executive order barring any U.S.-based financial transactions involving the new currency. Residents of the struggling nation and interested parties throughout the world are skeptical as to what results of this new cryptocurrency deployment will yield given Venezuela’s current state of financial ruin.

Countries Exploring Digital Currencies

Ecuador
Ecuador became the first country to have a state-run electronic payments system back in 2015. The official currency of Ecuador is the U.S. dollar, but exchanging old bills for new costs the country more than $3 million each year. The new digital currency allows residents to pay for select public and private services using digital money, and while it hasn’t eliminated cash as a form of payment, it has reduced this burden and works in tandem with the previous monetary scheme.

Countries Using a Hybrid

Tunisia
In 2015, the north African country partnered with Monetas, a global contracting platform, to boost its newly-created eDinar digital currency using the blockchain. This allowed for more security and less corruption throughout the system.

Senegal
Following Tunisia’s lead, Senegal launched it’s own digital currency to be used concurrently with the country’s CFA franc and can be stored in all mobile money and e-money wallets. The currency is base on the blockchain and has been designed to be compatible with other digital currencies used throughout the African continent.

Countries to Watch
Switzerland
While the country hasn’t announced any plans to develop its own cryptocurrency, the business-friendly and innovative country is embracing all things crypto. From January to October 2017, Switzerland was second only to the United States in terms of money raised in Initial Coin Offering (ICO) fundraising, a precursor to digital and cryptocurrency launches.

Gibraltar
The small European nation has been publishing papers and giving indications that they’re open to the idea of being an ICO haven where the markets, not individual people, would be the ones to regulate the market. Nothing is official yet, but the country hopes to have its plans implemented in late 2018.

Cayman Islands
This island nation has long been a favorite of the extremely wealthy as an offshore holding site for some of their assets, but the country is looking to become a leader in ICO capital raising. Thanks to a legal definition of securities that is much narrower than in the US and a tax code that is very business friendly, Cayman Islands are definitely a country on the move.

Mauritius
The small island off Africa’s eastern coast has been allowing borrowers to use Bitcoin and Ethereum’s Ether as collateral for loans since 2018 due to a partnership with Secured Automated Lending Technology (SALT). This platform allows people with these currencies to utilize them without selling the assets, a very attractive option in the highly volatile crypto markets.

Looking Ahead
As digital and cryptocurrencies become more and more popular, more countries will begin to adopt and/or regulate these transactions more regularly. Currently, many countries have banned cryptocurrencies, while others are abstaining from releasing an official position as the technology continues to develop. One thing is certain, this technology has the potential to shape the way we transact and do business on a global scale. To learn more about getting involved with or investing in cryptocurrencies, check out this Blockgeek article.

bank building in a city

Streamlining the OREO Sales Process: 2018 Market Update

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According to information made available by BankRegData.com, the value of OREO property held by U.S. banks has been falling from $17.51 billion in Q2 2015 to $8.45 billion by the end of Q4 2017– a change of more than 50%!

While the overall market climate is changing, it is worth noting that the pace is not the same everywhere in the country. According to data provided by RealtyTrac and their parent company, ATTOM Data Solutions, foreclosure rates for the entire United States stand at 1 in every 1,776 homes, while New Jersey clocks in at the highest with 1 in 605 homes and South Dakota boasts the lowest foreclosure rate at 1 in 11,082 homes as of March 2018. This tool shows the rate for each state in the nation.

With the waning of the foreclosure tides, it’s important to make the most of these assets and simplify the process of liquidating them. In the previous months and years, it may have made sense to have a variety of people and companies handling the onslaught of properties that were consistently streaming into the pre-foreclosure phase. This is no longer true. To simplify processes and consolidate services is to see increased efficiency and reduced costs and to do this, banks need an all-in-one solution.

One of the easiest ways to consolidate is to find a real estate company with experience in OREO distribution. It’s important to partner with a company that is able to work in most or all of the states where the asset properties are located. Real estate licensing requirements vary on a state-by-state basis so partnering with a single firm that can handle all needs will eliminate the backend processing and cost associated with having multiple vendors. If a bank is looking to offer these foreclosure properties in an auction setting, choosing a real estate firm that is also licensed as an auction house can further streamline this process.

RealtyHive offers these solutions to financial institutions throughout the country. From Maine to New Mexico, the Realty Hive team has more than 30 years of experience and has helped sell everything from multi-million dollar commercial buildings to small parcels of vacant land for government financial entities to local credit unions. See more here!

graph showing inflation during tenures of us fed chairs

Jerome Powell: The New Man Controlling Your Money

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In November 2017, President Trump announced he would be naming a new Chair of the Federal Reserve Board of Governors with the term starting on February 1, 2018. While the actions of the Federal Reserve affect the daily lives of all Americans in one way or another, not many people know the function of this agency or about its new leader. Here’s your handy guide to the Federal Reserve and it’s new leader, Jerome Powell.

What is the Fed?

The Federal Reserve, known simply as The Fed, is a governmental agency that controls the nation’s monetary policy, supervises and regulates the banking industry, and maintains the stability of the financial system. The Fed is split into three entities that all work to further the goals of the agency. The Federal Reserve Board of Governors, Federal Open Market Committee (FOMC), and the 12 Federal Reserve Banks. Each of the 12 Federal Reserve Banks has its own nine member board of directors that are chosen by member banks and the Board of Governors.

Unlike most governmental agencies, the Federal Reserve is not funded by congressional appropriations. Instead, its primary funding source is interest earned on the securities it owns. After payment of expenses and transfers to surplus (think a rainy-day fund with a $10 billion max), any net earnings are transferred to the US treasury.

What is the Board of Governors?

The Board is comprised of seven members who are appointed by the President of the United States and confirmed by the U.S. Senate. The full term for a Board member is 14 years** and members can’t be reappointed. From the Board, the President selects two members to serve as Chair and Vice Chair of the Board. Each serve four year terms and can be reappointed. The Fed meets eight times a year and while the general public usually doesn’t pay much attention to the bulk of their meetings, the decisions they make affect almost all Americans.

One of the ways the decisions of the Fed impact most Americans is that they set the interest rate for borrowed money. For example, say you have a variable-rate loan. When the Fed decides to raise the interest rate, your interest rate will also go up and you’ll owe more money on a debt than you would with a lower rate.

While not mandated by law, but typically upheld by tradition, the Chair of the Board of Governors also serves as the Chair of the FOMC. The FOMC is charged with overseeing “open market operations,” which affect the federal funds rate, which in turn influence overall monetary and credit conditions (as mentioned above), aggregate demand, and the entire economy as a whole.

**Because a Governor can be appointed to fill an unexpired term and then appointed to their own full-length term, the actual maximum amount of time a person could sit on the Board of Governors is just under 28 years. Alan Greenspan is the only person to serve five terms as Chair of the Board of Governors for a total of 20 years.

Who is Jerome Powell?

Powell is a 64 year old former investment banker and an Obama-era appointee to the Fed’s Board of Governors where he has served since 2012. He received a bachelor’s degree in politics from Princeton University, a law degree from Georgetown University and went on to serve as undersecretary for finance in the Treasury Department during George W. Bush’s administration. He is also a former partner at asset manager The Carlyle Group of Washington, D.C. and was a visiting scholar at the Bipartisan Policy Center, focusing on federal and state fiscal issues from 2010 until he joined the Board of Governors.

Was the pick controversial?

Kind of, but not why you’d expect.

The Chair of the Fed is a politically neutral position, meaning that when presidents and congressional control shift, they typically keep their job. Alan Greenspan, for example, was Chair from 1987 to 2006 and served during the Reagan, Bush, Clinton, and George W. Bush administrations. After Greenspan came Ben Bernanke who served for eight years during the George W. Bush and Obama administrations, however Janet Yellen, the outgoing Chair has only served for four years. So this breaks from recent tradition but isn’t really that surprising.

What are predictions for his tenure?

Former Chair Ben Bernanke has called Powell a “moderate and a consensus builder” and chief economist at Deutsche Bank, Peter Hooper, has said, “We suspect that a Powell-led Fed would not be a large step away from a Yellen-led Fed and would thus represent policy continuity for markets.” Like Yellen before him, Powell holds many of the same views on monetary policy, especially in terms of a focus on maximizing employment and keeping interest rates low to stimulate spending and investment. This is encouraging to markets, which loathe the unknown and tend to flourish with stability and also to high-dollar value investors and loan holders, such as real estate developers or mortgage holders, who are aided by low interest rates.

Only time will tell the outcome of Powell’s tenure as Chair of the Board, but with the market on an eight year bullish run, the second longest in U.S.history, and no obvious signs of impending trouble he’s got a great place to start.

Sources

Goldstein, Steve. “What a Jerome Powell Fed means for investors and the economy.” MarketWatch, MarketWatch, 3 Nov. 2017, 11:28ET, www.marketwatch.com/story/imagining-life-under-a-jerome-powell-fed-2017-10-20.
Grossman, Richard S. “ A 22nd Amendment for the Fed? Term limit essential.” Santa Maria Times, Santa Maria Times, 27 Jan. 2014, santamariatimes.com/news/opinion/editorial/commentary/a-nd-amendment-for-the-fed-term-limit-essential/article_c1ce9e72-8710-11e3-9d28-001a4bcf887a.html.
Taube, Samuel. “What to Expect From Fed Chair Jerome Powell.” Investment U , The Oxford Club, 4 Nov. 2017, www.investmentu.com/article/detail/56838/what-to-expect-fed-chair-jerome-powell#.Wkape9-nHct.