Are Buyers In the Driver’s Seat Again? And What That Could Mean For You
Have you been browsing real estate listings, driving by homes for sale, or even visiting open houses with the dream of becoming a homeowner? If you’ve been putting off buying a home in the uncertain economic landscape, now may be the time you’ve been waiting for. After years of a seller’s market where it was difficult and sometimes impossible for buyers to find their dream home, the trend is shifting in the buyers’ favor. A local real estate agent can help you navigate these trends and find the right home. Why Now is the Time to Buy Home buyers may be aware that the Fed keeps increasing interest rates, which reduces affordability. What they may not realize is that some changes in the housing market are beneficial to them. After a couple of years where homes went off the market just days after being listed, they are now sitting on the market longer. Instead of selling in days or a couple of weeks, you see homes in some areas listed for more than a month. With it taking longer for the properties to sell, it leads to the seller lowering the price. Price reductions help out buyers who may have a tight budget. Rising prices have made everyone’s budgets tighter, which may mean that homeowners decide to sell if they have more homes than they can comfortably afford. More homes on the market also lowers the price, benefiting buyers. Mortgage rates have reached the 6% mark for the first time since 2008. With higher rates, buying a home today is often less appealing and more expensive than a couple of years ago. This leads to fewer buyers feeling confident in making a significant investment now, knowing that a recession could lead to job loss and even tighter finances. More Options for Buying a Home If you’re one of the home buyers looking for a property amid economic uncertainty, you’ll be happy to know that options exist to help you get into a new home you can afford. More buyers are turning to adjustable-rate mortgages to lower their monthly payments and qualify for more homes. An adjustable-rate mortgage (ARM) allows you to get into a home at a lower interest rate than a fixed interest rate mortgage. Adjustable-rate mortgages charge a lower interest rate now than fixed loans with the ability to change the rate in a specific time period. For instance, a 5/1 ARM means that in five years, the interest rate will adjust to whatever is current at that time. Buyers can benefit from an ARM in today’s market because it increases their buying power. If the interest rates go down in five years or whenever the rates on an ARM adjust, the buyer will lower their payments. Another option for home buyers in today’s economy is the 2-1 Buy Down. This type of loan allows you to pay a lower interest rate now than current mortgage rates, raising it some in the next year and getting to the final rate in the third and future years. Sellers and developers will often pay for a buy-down to entice buyers to make an offer. Ways to Reduce the Cost of Buying a Home You don’t have to let the rising interest rates keep you from buying a home now if you’re ready. You can take steps to make it easier to get an affordable loan. For example, make sure you have excellent credit to get the best interest rates. Come up with a larger down payment to reduce the interest rate on your mortgage. Because you’re assuming more risk, lenders are often willing to negotiate. Fewer buyers are willing to waive real estate contingencies, such as not having a home inspection. Sellers also set up contingencies, such as having financing in place before putting in an offer. All these real estate contingencies limited the pool of buyers competing for the same property. With the loss of these contract contingencies, it has leveled the field for all buyers. You also still have the option of paying mortgage points to lower the rate. Lenders often offer the option of paying these mortgage points to make loans more affordable. For each point you pay to the lender, the interest rate goes down by one percent. If you plan to live in the home for a long time, this extra cost may pay off in the long run. If you’re a first-time buyer, you have access to various first-time buyer programs. These programs provide you with assistance for your down payment. Your real estate agent can point you toward local, state, and federal programs that will help make your home more affordable. Home buyers can take advantage of the changes in the market if they are willing to adjust their expectations. You may need to consider living in another area or a smaller home if you want to buy now. Your real estate agent can help you find an affordable home that will suit your needs. We're Here to Help
How to write an offer that will be accepted on a home.
You have found the perfect home and now it's time to write an offer. How can you make sure to get it accepted? The best place to start is to craft your offer around the needs of the seller. If you're in a seller's market, expect to be more agressive on your terms. If it's a buyers market, the seller may be more lenient. Knowing your budget, market trends, using the right agent, and having a strategy about which homes to offer on will help to make your offer get accepted.Check out the latest market trends here Things like price, timelines, splitting of fees, what's included, what's not included can make or break your offer. Let's break down each piece of the offer so you can put your best foot forward.Offer PricePrice is the most important factor in a offer. A seller's decision to accept an offer is greatly going to depend on what they will net on the sale of their home. When determining what price to offer, it's important to know what other homes in the area are selling for. This is where knowing the market trends really comes in handy. If on average, houses are going 4% over the list price, that's a good place to start. Close of EscrowWhen you make an offer, you will set timelines for how long the process will take. The close of escrow is the date is when the transaction will be finished and you will get possesion of the property. On average transactions take around 30 days to close. Typically, the shorter you can make this date the stronger your offer will be. A seller may need a longer close of escrow so be sure to know their situation. If you are financing, yor lender will determine how quickly you can close. ContingenciesIn California, you have three contingencies in your offer, one for inspections, one for appraisal, and one for securing your loan. These contingencies have timelines associated with them. 17 days for inspections and appraisal, and 21 for your loan. The shorter these timelines are, the stronger your offer will be. It essentially says, "Hey seller, in the event this doesn't work out, I won't waste much of your time." DepositAn earnest money deposit (EMD) is required to be put into escrow within three days of acceptance. At the end of the transaction, it is applied towards your down payment or closing costs. As a rule of thumb, we use 1% as an earnest money deposit. Increasing your earnest money deposit will help to make your offer stand out in a crowd. Financing TypeSome financing types are more lenient with requirements of a property. These requirements are typically focused on health and saftey. Conventional loans tend to be more lenient than FHA or VA offers. Depending on the property condition, your loan type may have an impact on which offer is chosen. Fee SplitsThere are a few fees listed on a California Residential Purchase Agreement. These include, escrow, title insurance, natural hazard zone disclosures, city and county transfer tax fees and home warranties. Any of these can be paid for by the buyer, the seller, or split between the two. The more fees you pay for as a buyer, the stronger your offer will be. What's Included in the SaleAnything that is not secured to the property is considered to be personal property and does not come with the house. It's a common thing to request that appliances stay with the home. There are checkboxes for the refridgerator, stove, and the washer and dryer. You can also write in items you would like to be included in the sale such as sheds, furniture, etc. If you ask for too much, it may make your offer not as appealing for the seller.Rent BacksIt can be difficult for the seller to get an offer accepted contingent on their property selling in seller's markets. It is common for the seller to need a rent back after the close of escrow so they can stay in their property while closing on their new home. If you're financing a property as your primary residence, you will need to take possession within 60 days. Most rent backs are for a 29 day period after the close of escrow. Anything longer than 29 days will require a lease to be put in place. A seller can pay for a rent back, but you can also do it at no charge which may help your offer to stand out.Don't ForgetTo be sure that your offer is taken seriously, be sure to include a pre-approval letter from your lender. You should also include proof of funds with your offer to show that you are able to fufill the contract.
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