Lina Robertson's Blog: September 2009

 

 

Why should you buy a home now?

I firmly believe that we will all look back on 2009 and say "I wish I got that house back in 2009!" 

It is truly a buyers market.

• More inventory than we have seen in years... So Many choices for buyers.
• Interest rates are at very affordable levels
• Sellers are becoming more willing to negotiate
• Lower prices than we have seen in years
• The median price of homes in Monmouth and Ocean counties are at a low point now and appear to be stable

What if you have a home to sell?

Worried about losing money on the sale of your home?  You have to take into account the money you will save when you buy your new home.

Here are some completely contrived numbers to illustrate the example:

If your home was "worth"  $225,000 in 2004 and you have to sell it for closer to $200,000.  In your mind you feel like you are losing $25,000. That is NOT the case.  First off, Hind site is 20/20, and you can kick yourself for not selling at the high forever.

You pick up much more when you move up to your next home.  If the home you want to buy is $300,000 and the numbers work out in a similar fashion to the above number, you effectively buy your next house at a $37,500 discount.  So in one scenario you see yourself as losing $25,000 but on the other you save $37,500... Thus realizing a $12,500 gain by buying the more expensive house at a discount...

So NOW is a great opportunity to buy if you plan to keep the house for the long run, I doubt you can go wrong.

More reasons NOW is the time to buy:

• The average rate for a 30 year mortgage over the past 20 years is about 7.5%, over the past 40 years, 9.5%.. but NOW we have rates near historic low levels, in the low 5's depending on credit score etc.
• First time buyers only have about 2 months left to buy and close on a home and Uncle Sam will give you $8,000 via a tax credit. (there are a few restrictions on the tax credit, but nothing crazy)
• Rates may start to climb in October as the stimulus money runs out
• Contrary to popular belief: It is not hard to get a mortgage today!

I could go on, but I am convinced that you cant go wrong buying a home now if you plan to keep it for a few years.

 

Have a great week!

Rob

Robert Rauf

Mortgage Banker

www.RobertRaufHomeLoans.com   or my blog: http://activerain.com/blogs/rrauf

(732)223-1630 x102

Since 1987 I have been helping my clients fulfill their dream of home ownership!

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One comment we often hear as real estate professionals is "I'm selling my home myself to save the commission." That is fine so long as you don't think that your potential buyers don't know that.

In fact, did you know that there are only 4 kinds of buyers out there? That's right, 4. And they are either working with a Realtor or they, too, will want to save the commission. If you have a "For Sale By Owner" sign in your yard, everyone knows that you are not paying a commission to a professional.

1. First time home buyers: They are the most likely to seek the help of a professional because they do not know all the ins and outs of the home buying process. Even if they come across your home and like it, they will want their agent involved. Being open to working with a buyer's agent and paying at least some commission might help you get your home sold.

2. Relocating buyer: They, too, usually work with a real estate agent because they are not in town, yet. Again, if you are willing to pay a buyer's agent commission, you may be able to work with one of these buyers and sell your home, that is, if you are available to show it when this buyer is in town house shopping. If not, they might just buy your neighbor's house because it's listed and on a lockbox and they were actually able to view it.

3. Move up buyers: They tend to feel more confident about the process because they have been there before. However, if they choose to work on their own, they'll negotiate you down on your price to save some of the commission themselves. Since 2 out of 3 FSBO that go under contract do not close when no Realtor is involved, it might not matter if you split the would-have-been commission with this buyer. The question is: can you get them to the closing table?

4. Investors: Probably the most savvy buyer out there and you can bet that they will not pay you a commission to work the sale of your home for you. Unless you are an investor yourself and you've sold many homes in the past, this buyer knows more about the process than you do and he/she knows that they will have to do all the work. And, unless you are an awesome negotiator, you will not save money if your buyer is an investor. Not a penny.

There you have it! These are the only 4 kinds of buyers out there, no more, no less.

Here's another way to look at it: appraisers do not care about the commission. Your house is worth what it is worth, whether or not there is a commission involved. For example, if you live in a neighborhood where homes of similar age and sizes sell for 150K, then your home is worth 150K.

With a 6% listing commission, you would have to pay 9K in commission, usually split between the listing and the selling brokers (if two agents are involved). If you sell on your own, you are not going to save the full 9K. Buyers will want to split those savings with you and might only offer you 145K for your home. If this is acceptable to you, all is good, but your savings are now down to 4K. If you calculate 2 or 3 months extra on the market (and 2-3 months of extra house payments), the advertising and signs costs, and the time involved in showing your home numerous times to buyers who may or may not qualify to buy it, is it really worth the aggravation? Besides, getting an offer/contract on your home is the easy part. Do you know what to do if you ever get that far?

I know what my time is worth, do you?

I am NOT a young man. And I have experienced a lot in my life, and one thing that I know for certain is that everything is cyclical!

We had been experiencing a severe drought the last few years. Now it won't stop raining. It's the cyclical nature of weather, the dryer it is, the dryer it gets. And the wetter it is, the wetter it gets!

Economics are cyclical too. The stock market has enjoyed boom years and bust years. People have made millions of dollars and then lost them again as the cyclical nature of the market ran its normal course. It takes only time for the winds of the market to shift in a different direction.

And of course, the real estate market is cyclical too. I purchased a home in the 1980's that came replete with a mortgage at an astounding17.5% interest rate. The market ground to a halt as the restricted pool of buyers that could qualify for a loan at the rate competed for the limited funds that were available to lend. In time, the money supply grew and the market recovered.

So there isn't really any quick-fix for what ails the economy right now. But in time, true market forces will prevail against all of the counterproductive Keynesian efforts to accelerate the process.

The net result is that a lot of buyers are getting some bargains right now. But these low prices combined with low interest rates won't last forever, It's the cyclical nature of things.

And those that seize the opportunity now will be sitting pretty!

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