3 Important Tips Homebuyers Need to Know for a Successful 2019
Most homebuyers of all shapes and sizes have become frustrated with where things have gone in our real estate market and the challenges that have been experienced by many regarding a bad A-letter word — Affordability (the lack of it). I understand that all can seem lost to heartbroken homebuyers that think they may have missed out on a piece of the American dream for themselves in this market — but not everything is lost yet!
Here are the 3 most important tips that I think homebuyers should know and do to get a chance in homeownership and begin the journey towards financial wealth.
Tip #1: Don’t give up on buying in today’s market. Do the homework & move forward.
Yes, the market has seen incredible gains in homes values (those darn sellers are sitting happy!) and yes, interest rates have started to tick up in the past year and a half, but here’s the important thing — historically, interest rates are still EXTREMELY LOW. Consider that our parents and grandparents have seen mortgage rates upwards of 14% before! As an example, if you would take a $250,000 mortgage loan back in the day at 14% you’d be paying a monthly payment of principal & interest of about $3,000 per month ($36,000 per year)!
How’s that for perspective? Why allow rates to go up much more before you get into a home!?
What would be the alternative to not purchasing? Renting. And unfortunately, the rental market values are very high right now and are forecasted to hold strong and possibly see more of an uptick in the coming years (because when more people give up on buying, landlords benefit from them going over to rentals. Simple supply & demand drives rental rates up in this case). The difference between a mortgage payment and current rental rates in today’s market can be a matter of $100-$200 per month and even though that might sound like a lot to you, it is a small price to pay for investing in your financial future and the benefits that come with homeownership. Based on today’s home & rental values, a homebuyer would be making a better decision to buy a home, rather than renting, if they are planning on living in their new home for at least 2 to 3 years — that’s it! I dare say that wouldn’t be too hard of a commitment, especially if you are used to moving from rental-to-rental that often already, right? Again, this is centered around the finances of purchasing and not the personal benefits that homeownership brings to your life and family. We’ll talk about that a little later on another article!
Zillow has a very useful “Rent vs Buy Calculator” that helps you understand what would make sense to do (buy or rent) based on your financial budget and comfort level.
Here’s the link for you to check it out! https://www.zillow.com/rent-vs-buy-calculator/
Here’s the takeaway: the market might seem like it’s out-of-reach for many, but that is simply not true. If you decide to give up and sit out for the next go-around, you’re going to end up kicking yourself because home values might still see gradual appreciation levels WITH much higher interest rates in the coming years. If that would be the case, you’re not looking at owning a home for another 8 to 10 years…yikes!
2. Plan on buying in the “off-season” instead.
Every homebuyer out there wants a deal…a great deal, and I’m sorry to tell you that finding those deals right now feels a lot like looking for treasure in an Indiana Jones movie. BUT, you can increase your chances of finding a better deal when most homebuyers are not in the market competing with you. Our market is a little more difficult to pin down of when this “off-season” occurs because of “snow bird” buyers, second-home buyers, investor buyers, etc., but data supports a low-activity and low-sales window from about 1 week before Thanksgiving to the last week in January. I’m sure you can figure out why this timeframe is dead for real estate sales…because it’s “holidaymania!” There is so much going on through these 11 weeks or so, that making one of the largest financial decisions of your life can seem a bit daunting (not to mention the amount of spending we do during this time!) for anyone.
It can seem crazy and overwhelming to be looking to buy a home at this time, but let me share with you the opportunities you can expect:
- SELLERS IN TOUGH SITUATIONS
Sellers are typically much more motivated to sell at this time, than any other time through out the year. Why? Because sellers also don’t want to be dealing with the stresses and logistics of selling a home during the holiday season, but it is typically something circumstantial in nature that is “forcing” them out of their home. This can include things such as: a divorce, the death of a/the owner (held in a trust/estate), an abrupt job relocation, a last-minute sale to reduce tax liabilities at the end of the year (second-home owners, investors) and more. You definitely don’t ever wish to be in one of these situations yourself, but the truth is that they will create opportunity for you as a homebuyer. A seller’s most important factor for selling at this time is speed, which lends you the helping hand on price. I have seen many homebuyers make some KILLER buys during this season and I want the same for you!
- LESS COMPETITION
If you commit to shopping around for your next home during this season, you will find yourself being one of very few others in the marketplace. What does that mean? Less competition. The less competition there is for the homes on the market, the less negotiating power sellers will have on offers. This is simple supply and demand. If demand is low because there aren’t that many shoppers in the market, the price will see downward pressure — giving you opportunity to buy at a great price! I understand that you might not be up for spending your holiday season away from family because you’re going bananas looking for your new home, but biting the bullet on this will be well worth it for you.
- DEFERRED MAINTENANCE IS YOUR FRIEND
It is pretty common to find properties during this season to have more obvious deferred maintenance issues compared to other seasons because homeowners don’t really like to be working during the colder conditions. Homes marketed in the winter tend to present a little “rougher” compared to spring/summer because of the dull colors, dead vegetation, etc., but on-top of that, homeowners aren’t too proactive on repairs during this time because of holiday schedules and colder weather. This gives you the opportunity to position yourself a little better during negotiations if there are numerous ones to deal with when you move-in.
There are some sacrifices you will have to make for buying a home and moving in during the holiday season, but I strongly believe that in this type of market you need all the leverage you can get!
3. Consider using a renovation-wrapped loan to finance a fixer upper.
Most of the time I find myself advising homebuyers looking for their next HGTV fixer-upper to not get their hopes up because the discount price on the purchase of the home in our market is typically very low and the cost of the remodel is too expensive, so in most cases it doesn’t make sense to do them. However, lenders have started to roll out some pretty fabulous renovation loans that can be wrapped into your mortgage loan and they might just be the answer to satisfy your Joanna or Chip Gaines dreams of your fixer-upper!
These types of loans will allow you to find a property that might have been too distressed for the typical FHA loan requirements and now be financeable with a renovation loan. The ideal situation will be to calculate the mortgage amount (specifically the monthly payment) you can comfortably handle and find a distressed property at a good price where the renovation expenses will add up close to the mortgage amount you can afford (mortgage amount + remodel expenses = total loan amount that should be within your budget per month). I won’t lie to you and say that there are hundreds of these properties out there that would work, but it is definitely possible, especially if you get a plan set up with a lender to take this route. I have included a link here to one of our lenders that we work with (Disclaimer: we have no interest vested in this mortgage company or lender and you are free to conduct your own research) that has a very handy guide to these types of loans.
These loans will allow you to theoretically pay the same monthly payment you were expecting to in the first place, but they will fund your remodel and help increase the value of your home sooner than later! Woo hoo!
Link to Renovation Loan Guide (Fairway Mortgage): https://www.dropbox.com/s/0csi6zd3jxucrvq/Renovation%20Loan%20Guide%20-%20Fairway%20Mortgage.pdf?dl=0
Let’s be honest, the real estate market has definitely been a strong wind at seller’s backs for the past decade, but with some tactful approaches and unrelenting perseverance homebuyers can still make some good moves in this market. I shouldn’t have to tell you that having a fantastic real estate agent that can help and guide you through a successful purchase is vital, but I will! So make sure you have a rockstar in your corner!
There is a popular adage in the real estate industry that teaches: “people make money on the buy” for any deal, and that has rung true in my experience.
Opportunities are limited and adversity is high, but who doesn’t like an underdog story?
There are always ways to insure that you come out on top of different real estate markets and these 3 important tips should benefit you tremendously in 2019.
3 Important Tips Homebuyers Need to Know for a Successful 2019
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