Buyers often get frustrated in a hot real estate market. Before they can even schedule a showing a house might go under contract. They put in a full price offer only to find out they were outbid by another buyer for more than the asking price. All of this adds up to motivate buyers and works out in creating a great seller’s market. So, should you buy in a seller’s market?
This is a great time to purchase a new home no matter if you are a first-time home buyer or this is your third or fourth home. Also, a perfect time to purchase that summer house or camp on the lake that you have been dreaming about. While home prices are slightly up over the last couple years, the interest rates on mortgages are at all-time lows.
I just had a buyer close on a house and he locked in his mortgage at 2.75 percent for a 30-year fixed and only put 3.5 percent down. Obviously, this keeps his monthly payment down and that is very important to all buyers. The other thing that a low interest rate does is increase a person’s buying power. How does that work you ask? Here is a simple example to explain it.
A buyer wants to have his payment around $1,200 per month not including property taxes and insurance. If they base their search on a 4 percent interest rate, they will be looking around the $250,000 range. If they can lower their rate to 3 percent it would give them about a $35,000 increase in their price range and still keep their payment at $1,200. So now they can purchase a home for $285,000.
With interest rates this low I often encourage buyers to push their comfort level with what they think they want for a monthly payment. I don’t want them to over extend themselves, but I do want them to consider where they are at with their careers. Do they have a raise coming, perhaps a promotion, or maybe they are about to have their vehicle or boat paid off?
My thought is that most people get a yearly raise and our income goes up. This will mean that the monthly payment won’t seem quite as much in a year or two once you pay off that car or perhaps when a child turns 18 and graduates, the child support stops and you can afford a little more of a payment. So, take time to look at the overall big picture when deciding what your price range is for purchasing your new home.
Sellers I have one important piece of advice for when trying to sell in this very hot seller’s market. Price your home correctly. It is the most important thing you can do. Buyer’s are very much aware of what home values are in this day an age. A correctly priced home will have several buyers looking at it and will generally wind up with more than one offer. If your home isn’t selling in this market, then there is something drastically wrong or it is overpriced.
This article written by Matthew Trudel, Owner Five Star Realty, Windham 207-939-6971. <