Low Rates & Lower Prices

                    Since the real estate frenzy has settled down and prices are at more normal levels, it’s a great time to pick up bargains! Rates are still at historic lows, despite what the media would have you believe. There has been a lot of noise about adjustable rate mortgages, and how people are getting caught in these mortgages that all of a sudden have a substantial monthly payment increase. The hit to the sub-prime market was a direct result of lax lending guidelines for people with challenged credit, and allowed un-qualified people to get loans for which they were not capable of repayment. These loans were typically programs such as a 3/1, 5/1, etc. which are fixed for the first number of years and then adjust after that, enabling people to get into a home with a lower monthly payment at first, the idea being that they are expecting to increase their income or pay it off before it adjusts. Other programs with an even lower payment start are called Option ARMS and can adjust monthly or have a certain period at a fixed minimum payment (less than an interest-only payment) and/or accrual rate (fixed interest rate). All of these programs have distinct advantages and disadvantages and are not for everyone. One must have a plan! As there are many homes on the market these days, there is a lot of competition for able buyers, and smart sellers are offering incentives such as buying down the interest rate, paying closing costs, or of course lowering their asking price. Buyers are getting more for their money than a year ago, and with interest rates at about the same level more buying power also. 100% financing is still available, as are many, many other programs for people with good credit. For lower credit scores however there has been a significant tightening of guidelines, and some people will have to wait to buy. 

Financing Incentives

One often overlooked method of attracting buyers is to have the seller pay points-buy down the buyers rate. For the seller it is usually cheaper than lowering their asking price, and obviously lowering the price is not popular with sellers. For the buyer this is a huge incentive as getting a lower rate affects their payment for as long as they hold the loan. Buyers are also very rate conscious, and consider purchases relative to monthly payments (can I afford this payment). By buying down the rate, a seller can make the difference in affordability. Over the long term this can actually be more valuable than getting the property for a little less money. Also, in a psychological way, it is better for a seller to offer value to the buyer than to cut percieved property value. It is a gift to the potential buyer and sets the seller’s property apart from the competition, and as we all know there is alot of that! It’s a win win situation!!! Sellers can also offer incentives such as  free cars, or anything else of value to attract attention to their property. In this market it’s important  to cover all the bases and be creative.

The Advantages of a Real Estate Team

Most everyone would agree that teamwork leads to a better result, no matter what the objective is. Many real estate professionals promote their teams as they should.  Each member  brings their own expertise and personality into the mix, and as time goes by develop a rapport and knowledge on how best to serve their client. A Realtor/Lender partnership results in a smoother transaction, and a better understanding of their client’s and wants. The truth is that homes and loans go together like peanut butter and jelly, unless your fortunate enough to be able to write a check for your new home! Other members of a great team include loan processors, appraisers, title & escrow officers, home inspectors, and pest control companies. Great teams also consist of referral partners such as tax accountants, 1031 exchange companies, insurance agents, architects, contractors and other tradesmen. Everyone loves a referral instead of calling out of the yellow pages! Teams are especially great for out of town buyers who are unfamiliar with their new surroundings. A good knowledge of specific areas and neighborhoods (i.e. which side of the tracks do you want to be on) help with ensuring that clients are investing in value (location, location, location) and getting referred to ethical expert professionals. Even knowing great restaurants, clubs, events, etc. are invaluable to your clients. It all adds up to make the difference that counts!

Great time to buy real estate!!!

As we hear the media speak about the growing foreclosures and falling prices, we might be led to think that real estate investing is a risky proposition!  In fact the opposite is true! As prices ‘correct’ to more realistic values and mortgage rates remain at historic lows, the longterm potential of real estate appreciation becomes more sustainable. One cannot expect the enormous rates of appreciation of a few years ago to continue without these corrections.  There are many bargains around us now, and many sellers are all too anxious to negotiate! Also, the recent fallout of the subprime lending market was a ‘correction’ of another sort. The lax lending guidelines for credit-challenged people in the middle of the real estate appreciation frenzy and froth resulted in lenders tightening their guidelines, and resulting in more common sense lending. It is true that some people may not be able to purchase homes right now because of credit issues, but with credit counseling and financial education  and a little time, they will! The subprime correction has really not affected people with good credit and financial stability, and by tightening guidelines for lending less people will be likely to go through foreclosure.  These corrections are healthy for the market and the industry.