July 26th, 2022 - Amber Nestor - Professional Real Estate Agent
Land, Luxury, & Water-Feature Property Specialist
Will also touch on the differences between the land market and the home market briefly.
A lot of folks have expressed concerns and uncertainty about the state of our economy, and our real estate market, and so I am writing today to offer some good news on these 2 things, and some advice, based on my expertise in this business.
I am also going to offer you some data to consider, which I am going to pull from the MLS which I am primarily a member of: KAARMLS
Things are not so uncertain as they might seem. They have shifted, yet. But, if you understand how to leverage your position during a negotiation, it's not much of a problem. I will explain, and I will also offer some encouragement.
If you pretend for a moment that you are a bird, looking down and observing the patterns and happenings of life for a bit, and there is a lot of good going on. There is ebb and flow in the tides of business and in economies all the time. But, if you learn to go with the flow, there is limitless opportunity.
The news might get you worried but, not to worry.
Now, before I continue my discussion on interest rates, the economy, and the real estate marketplace, I am going to introduce some ideas about faith, and then bring the conversation back around to re-focus on real estate.
I am a Christian. However, I love, respect, and admire the beliefs and religions of many other people. I don't think that my way is the only way. I just know that is what works for me, and saved me. It is what I believe in.
I believe to know Jesus Christ is the greatest meaning in life. I wish everyone could experience faith the way that I do.
Lastly, I am far from perfect. I am on a journey like everyone else. I have good days and challenging days. I am working to make my way in a world filled with chaos, just like you, and everyone else. Our circumstances are all much more complex that what they appear to be on the surface.
Now, with that disclaimer out of the way, I will continue with a Bible Verse of encouragement for everyone trying to figure out what to think about the current state of our economy:
The Book of Philippians Chapter 4 Verse 8 ( New Living Translation ) says this:
"And now, dear brothers and sisters, one final thing. Fix your thoughts on what is true, and honorable, and right, and pure, and lovely, and admirable. Think about things that are excellent and worthy of praise."
This is an excellent verse for positive encouragement in any season of life, and any season of the economy.
It's important to me that I convey my faith in my business dealings. But, sometimes, I hesitate. I have decided that is silly, to hesitate. It's the most important part of who I am, and is the driving force behind everything I do. Again, I am not perfect. I am human like everyone else.
So, what's good? So what good and encouraging can be said about the marketplace? A lot! There is a lot good that can be said about our marketplace.
Well, interest rates are up. Sure, yeah, they are. But, play with this Amortization Schedule and ask yourself, how much does this really affect the decisions I personally plan on making for land, home, or construction projects?
Here is a website link to play with those numbers and explore:
Below I will post some images of some test runs for you to compare.
To be clear, these are examples of 30 year mortgage scenarios to buy a house or to do a land + home package construction loan.
If you save up money to buy land separately before you build a home, that can be a VERY helpful route to go.
If you save up cash to buy a house, that can also be a very helpful way to go.
You avoid all of the interest, specifically compound interest.
But, let's say, you are renting, and you want to own a home, and are not happy with apartment living, and are ready to have a yard, a garden, pets, a larger space, etc.
Here are some lower budget scenarios to consider. Notice that there is a comparison between the 2% interest rate and a 7% interest rate.
I'll admit, this is pretty shocking. So what can be done? Rent somewhere you are as happy to rent as possible. Create stability. Sign up at CreditSesame.com Monitor your 5 major factors in your credit score. Be consistent. Be consistent. Be consistent.
Position yourself to ready to jump on an opportunity: a good deal.
Understand your negotiation leverage.
I will elaborate.
Let's say you are done with renting. You've tried to find places to rent that have good, sound-barrier construction and that are clean and affordable. And you must have more space, and you absolutely can not stand another day of renting.
Let's say you have done all the work needed to get your credit score above a 700+.
And let's say you have negotiated the best possible interest rate you can, you have proof of funds for your earnest money, your cash down-payment on your loan, and a strong pre-qual letter from your lender, very strong.
How do you get a good price.
Hire a real real estate agent like me.
Here's what I will do for you:
Create a file that has all of your documents in it which we will attach for your offers. (proof of funds, pre-qual letter, etc._
Create an attachment that displays for the seller to examine the comparison, up above of the cost of lending, so they can see the hard numbers and consider how that impacts you as a buyer.
We will examine how many days the property has been on the market (in this case a house), and determine if the seller may be ready to consider that a cash buyer offer might take longer they they desire, and that offers from folks relying on lending, must also consider the cost of the lending.
Make offers that make your case. This is the last step. And DON'T be in a rush to buy. Be realistic. Putting yourself into a position that makes it easy for you to say, "Here is what it will cost me to borrow in order to buy. And here is what I am comfortable paying. Will you consider selling to me?"
Offer less than listing price for properties, especially, that have been on the market for longer periods of time, and even new ones.
If you are trying to buy land, the land market is not affected as much by lending rates. The home buyer market is more strongly affected by lending rates.
This is because most folks buying land are either paying cash, or are in a position to have a larger down-payment, smaller loan, and plan to pay it off very quickly. So, interest rates don't affect the buyer pool as drastically as they affect the home buying buyer pool. This is me speaking from my personal experience specialist in land for the past 5 calendar years. Also, land can take a week to 23 months to sell on average, in my experience, typically, if strongly marketed, and with desirable topography, location, water, and internet access. (Usually it sells faster than 23 months.)
Houses, well they are a different ball-game. And we are seeing in crease in inventory, and a longer period of time on the market before sale occurs.
So, adjust your perspective. Ride this wave, one of many in our economy. Make your expectations realistic in this snapshot of the market in time. And, position yourself to snag a deal, and everything will work out.
I hope this helps. I know it can be a bit discouraging when the cost of lender becomes so high, but seize this opportunity to hold still a while, strength your roots where they are, and position yourself for the deal that are bound to present themselves in the future, or start negotiating the ones you see now based on the facts and data we can present, as discussed above.
If a seller wants to hold out for a cash buyer willing to pay full price, that's their prerogative. If a seller wants to consider the cost of lending in our current marketplace, that could be a wise strategy for a faster sale.
Thank you for visiting.
Amber Nestor - Professional Real Estate Agent