Buying and Selling in a Transitioning Market
In the real estate world, the market is constantly evolving. Currently, we find ourselves in a transitioning market where inventory is up and properties are taking longer to sell. Despite this shift, prices have remained steady for over a year. This unique scenario brings about different opportunities and challenges for buyers and sellers. For buyers, a transitioning market with increased inventory means more options to choose from. This is good news for those who have been struggling to find the perfect home due to limited listings in the past. Also, the extra supply has led to seller's becoming more negotiable, with the average home in McLennan County selling for 94% of original list price. That said, well priced homes are still selling quickly, so it's essential to be ready to act quickly when you find a home that fits your needs and price range Sellers, on the other hand, might find the market a bit more challenging. With more inventory, buyers have the luxury of being selective, which can result in properties taking longer to sell. However, it doesn't necessarily mean you'll have to significantly drop your price. Despite the increased competition, prices have remained steady for over a year. Sellers can maintain their selling price, but it's crucial to ensure your property stands out in the crowd. This could involve staging your home, making necessary repairs, or being flexible with viewing times to attract more potential buyers. In a transitioning market, timing is everything. For sellers, it might take a little longer to close a deal, but patience can pay off. Meanwhile, buyers may benefit from having more choices and less pressure to make a hasty decision. While the real estate market continues to shift, keeping an eye on trends and understanding how they affect buyers and sellers can make a significant difference. Moreover, working with an experienced real estate professional who is attuned to these transitions will help navigate the ever-changing real estate landscape and ensure a successful buying or selling experience. Whether you're buying or selling, be prepared, stay flexible, and most importantly, stay informed.
Buy, Sell or Wait?
Home prices have seen a sharp rise over the last 2 years and today’s mortgage rates are at a 14 year high. Many people are wondering if now is the time to buy, sell or simply wait for the housing market to settle down. The decision to buy now can be a stressful one, but waiting too long can present a different set of challenges. There are several things you should evaluate as you consider the best option for you. Should I buy now? One of the first things you should consider is your current financial situation. There are three questions you should ask yourself. 1. What does my credit score look like? According to Bankrate.com “Your credit score is one of the most important factors lenders consider when you apply for a mortgage. Not just to qualify for the loan itself, but for the conditions. Typically, the higher your score, the lower the interest rates and better terms you'll qualify for.”1 A higher score gives a lender confidence that you will make your payments on time. The good news is even if your credit score isn’t the best, there are immediate steps you can take to begin to raise your score. 2. Have you saved for a downpayment? The larger your downpayment is, the better interest rate you’ll qualify for because a lender will see you as a lower risk borrower. Your monthly payments will be less, and the lower interest rates will end up saving you a significant amount of money over the lifetime of the mortgage. 3. Do you plan to own this home for a while? Besides making sure that you can afford a home, you should also consider how long you intend to stay in one place. Most financial experts agree that living in a home for 5 years before selling makes the most financial sense. There are a lot of one-time costs involved with buying and selling so make sure you’ve factored that into your consideration. If you don’t have a 5-year plan, then it may not be the most ideal time to buy. Or make sure that your purchase is much lower than what you can afford so if you decide to move quickly, you’ll be able to do it even if you get hit with a loss. Another important thing to consider is what the local market looks like. Here are a few things to research before buying a home. 1. Browse listings in your neighborhood/area to find out what prices are like for similar homes. Websites such as Realtor.com, Zillow, and Trulia are helpful online resources for researching local markets. 2. Get a comparative market analysis. A CMA will give details like active listings on the MLS (Multiple Listing Service), square footage, location, lots sizes and other selling points for specific properties, information about listings already sold and what buyers paid for those properties. Investopedia describes a CMA as “an estimate of a home’s price used to help sellers set listing prices and help buyers make competitive offers.”2Contact a local real estate agent or broker to get a CMA for the area you’re considering buying in. 3. Check what sales prices have been like over time. By looking at prices today compared with prices from a year or two ago you will see the trends in that specific area and can see if houses are significantly higher priced than a couple of years ago and the market is in a bubble or if there is a dip in prices and it’s a great time to buy. Should I sell now? Many are asking if this is a good time to sell. There are several things that could make selling now a good decision. 1. Are you ready to downsize? It may be more budget friendly to downsize as opposed to maintaining a larger more expensive home. For older homeowners it may actually be necessary to go from a two story home to one level so they avoid stairs. Or to find a new home that doesn’t require constant maintenance and repairs. 2. Is there a supply shortage? Currently the US is experiencing a housing shortage across the country. “ Home prices are up more than 30% over the past couple of years, making homeownership unaffordable for millions of Americans. Rents are rising sharply too. The biggest culprit is this historic housing shortage. Strong demand and low supply mean higher prices. Part of the problem goes back to the last housing crash, which happened around 2008. After that, many homebuilders went out of business, and economists say we didn't build enough for a decade.”3 When supply is short you have a better chance to sell your home for a higher price and then can use that to put into your next home. 3. Do you need to re-locate? If you receive a new job offer and need to move, selling may not be an option, but a necessity. In this case the decision is easy and you can maximize in this market to sell high and find something in your price range in a new location. Should I wait? While there are pros and cons with buying or selling a home right now, ultimately you have to consider your own needs and goals and evaluate what makes the most economic sense for you. Here are some questions that might help you decide waiting is your best option for now. 1. What does my financial situation look like? Before buying a home you want to make sure your credit score is good. If it is not up to par, it may be better to wait and work on improving this number. If you don’t have a significant down payment you may also want to wait and look for ways you can save so that you can get a better mortgage rate. Consider canceling monthly expenses you may be paying and not utilizing, like monthly subscriptions & fees. Or pay off credit cards so you aren’t incurring large interest fees. 2. Will this deplete all my savings? If buying now leaves you with no extra money in your savings account, you may want to wait. If the economy gets worse or you lose a job you don’t want to have wiped out all your savings. “Most financial experts recommend that you have somewhere between three months and six months of basic living expenses in your emergency fund. The three-month guideline is generally recommended for those who are in salaried positions and have more secure employment. The six-month recommendation is for those who have less stable employment or earn variable incomes.” 3. What is the condition of my home? If you have a large list of repairs needing to be competed, you would be better off waiting to sell until you get the work done. When you list your home, it needs to be in top shape and look appealing. Unfinished projects can be a turn off to potential buyers. It’s always a good idea to finish any home improvement projects before putting your home on the market to secure the highest price. The Bottom Line: If you’re wanting to be a homeowner but hoping to wait out the high prices, you may be waiting a while. The good news is prices can’t go up indefinitely. However, the reality is it is still a strong seller’s market. There is high buyer demand and continued supply shortages, making it a good time to sell your home, if you’re ready. If interest rates continue to go up, some buyers may decide to step back and wait it out. Buying or selling may also be best decided based on your current goals and finances. So be sure to research all your options before making a decision to buy or sell so that you can make an informed choice based on your specific financial situation. If you need to talk to an expert to evaluate your options, feel free to reach out today for a free consultation.
Types of Financing in Real Estate
When it comes to real estate, financing is one of the most important aspects to consider. Whether you’re a buyer or an investor, it’s essential to understand the different types of financing available to you. In this blog post, we’ll be discussing some common types of financing in real estate, including conventional financing, FHA, USDA, owner financing, and subject-to financing. Conventional Financing Conventional financing is the most common type of financing in real estate. This type of financing is offered by banks and other lending institutions and is not backed by the government. With conventional financing, the borrower typically puts down 20% of the purchase price as a down payment, but can put down as little as 5% of the purchase price. Putting down less than 20% will result in additional fees. The interest rate and terms of the loan will depend on the borrower’s credit score and other factors. FHA Financing FHA financing is another popular type of financing in real estate. This type of financing is backed by the Federal Housing Administration (FHA), which allows borrowers to qualify for a loan with a lower down payment and lower credit score requirements. With an FHA loan, the borrower typically puts down 3.5% of the purchase price as a down payment. The interest rate and terms of the loan will depend on the borrower’s credit score and other factors. USDA Financing USDA financing is a type of financing that is available for rural properties. This type of financing is backed by the United States Department of Agriculture (USDA) and is designed to help low- to moderate-income families purchase homes in rural areas. With a USDA loan, the borrower typically puts down 0% of the purchase price as a down payment. The interest rate and terms of the loan will depend on the borrower’s credit score and other factors. Owner Financing Owner financing is a type of financing that is offered by the seller of the property. With owner financing, the seller acts as the lender and allows the buyer to make payments directly to them. This type of financing is typically used when the buyer is unable to qualify for traditional financing. The terms of the loan will be negotiated between the buyer and the seller. Subject-To Financing Subject-to financing is a type of financing where the buyer takes over the seller’s existing mortgage. With subject-to financing, the buyer is not required to obtain traditional financing. Instead, they take over the existing mortgage and make payments directly to the lender. This type of financing is typically used when the seller has equity in the property and the buyer is unable to obtain traditional financing. This type of financing is becoming more popular due to the current interest rates being double that of the previous years. In conclusion, there are many different types of financing available in real estate. Whether you’re a buyer or an investor, it’s important to understand the different types of financing available to you. By understanding the pros and cons of each type of financing, you can make an informed decision that will help you achieve your real estate goals.
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