With rising interest rates, realtors and lenders are working together to counteract the impact with creative home buyer assistance strategies. In this article, we will explore these strategies and how Hague Partners can help you through the buying and selling process.
RISING INTEREST RATES HURT BUYERS AND SELLERS
Homes are seeing price reductions in markets all over the country. When sellers reduce home prices, it can mean that they were simply asking too much for their home. This is a common mistake home sellers make and can be prevented when working with a professional realtor who knows how to market the home properly for current market conditions
A reduction in price often causes buyers to take a wait-and-see approach to making offers on a home. If the price was reduced once (or twice), maybe they will reduce it again? When interest rates rise, affordability goes down, which puts downward pressure on sales prices.
HOW SELLER CONCESSIONS WORK
Lenders allow the seller of a home to credit a portion of their proceeds to the home buyer. This is called a seller concession. Seller concessions can be used to pay a buyer’s closing costs only and cannot be used to help with the down payment.
What experienced mortgage and real estate professionals know is that seller concessions can also be used to pay discount points. What are discount points? Discount points allow a home buyer to make a pre-paid interest payment to permanently buy down the interest rate over the term of the loan.
THE RIGHT TIME. THE RIGHT MARKET.
While this is a win/win strategy in any real estate market, today this is a particularly powerful tool for maximizing the benefit for all parties in the transaction. When interest rates rise as quickly as they have in the past couple of months, a shock moves through the market that causes everyone to become confused, and sometimes make poor decisions based on limited information.
WHAT’S A POOR DECISION FOR A HOME BUYER?
The poorest decision for a home buyer is not buying because you think you cannot afford to. Owning real estate is a short-term decision about investing in your long-term financial stability and the accumulation of personal wealth. The ability to earn equity over time and fix your housing expenses over a long period of time is a luxury
that renters simply do not have. Your landlord can raise your rent, or sell the home you’re renting at any time, without any warning. That’s a tough spot to be in when it happens to you.
WHAT’S A POOR DECISION FOR A HOME SELLER?
The poorest decision for a home seller is pricing your home wrong when you list it, scaring away potential buyers. This results in lowering the sales price until you get a good offer from the limited buyers in the market. Smart realtors will help you price your home right and advertise your home as an opportunity for buyers using Seller Paid Concessions as Buyer Assistance. By advertising your home this way, you are striking back against higher interest rates, and attracting more buyers willing to pay you what your home is worth.
For more information, contact Ryan Nelson at AmeriFirst Financial Inc. at (480) 861-7841 or ryan@amerifirst.us.