Real Estate: Home ownership strategies
Labor Day weekend has come and gone, the kids are back at school and the holidays are right around the corner. What does this mean for real estate? Statistically, this time of year slows down and this slow down is to be expected. The summer buying frenzy has passed and now homes that are still on the market are likely to have motivated sellers.
According to the South Tahoe Association of Realtors Multiple Listing Service Single Family Residential Market Analysis, in August 2022, compared to August 2021, we saw an average sales price of $705,000 which is up 3.8% compared to last year’s average of $679,000. The majority of the sales took 31-60 days from the time they hit the market, to close. Bottom line, home values are still strong. Setting realistic expectations regarding home values and time frames with our clients is always some of the most important details we discuss in the very beginning.
Now, if you are a seller, and are curious about a buyer’s mindset or want to find ways to incentive someone to write an offer on your home, read on…
I tapped into our in-house lender, Mark Treiber, Sr. Loan Originator with Nations Lending, about his opinion, and this is what he said. “Like Realtors, mortgage lenders are working to calm the effects of rising prices and higher interest rates. Earlier this year, a home buyer with a gross monthly income of $8,000 could have potentially qualified to purchase a $700,000 home with a 20% down payment. Today, that same buyer qualifies for a home priced at $530,000. But there are mortgage strategies to partially offset this rise in interest rates.”
Buying a duplex or triplex increases the buying power because rental income from the extra units is added to the buyer’s income. A mortgage tax credit provides extra leverage for those who qualify. If you are an eligible veteran, the VA loan is one of the best mortgage products available.
Fannie Mae and Freddie Mac (the massive public agencies who keep the mortgage industry humming) increased their loan limits to $675,000, which makes it easier to qualify for a larger mortgage. Plus, the CFPB (a governmental regulatory agency) has relaxed some of their guidelines with the intent of making home ownership more widely available in the current higher price/higher interest rate environment.
Another strategy that has been trending is a 2/1 buy down: If the seller of a $700,000 home does a 2% price reduction, which lowers the buyer’s payment by $74 per month. Instead, the seller could skip the price reduction and “buy down” the buyer’s interest rate by 2%, thus reducing the buyer’s payment by $343 per month. The drawback is that the buyer still must qualify at the higher interest rate and after 24 months the buyer is paying interest at the higher rate.”
So, if you were to take anything away from this article, it would be, if you have a home on the market, you may want to consider ways to incentivize buyers. Price reductions are not always needed. Sometimes, it could just be giving an option to buy down a buyer’s interest rate or contribute toward closing costs.
If you are a buyer out there, I encourage you to work with a lender that likes to solve problems, gives creative options and truly educates you about ways to achieve homeownership.
Kaylin Culver is a Realtor for Re/Max Gold based in South Lake Tahoe. She is part of the Lake Tahoe Real Estate Team, led by Broker-Owner, Jesse Schue.
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