From the coronavirus real estate frenzy to 8% interest rates: How to grow in this new real estate environment
Let’s be honest: the majority of buyers and sellers are feeling whiplash from this rapidly changing real estate landscape. From low interest rates below 3% during the COVID-19 era to current market interest rates that fluctuate around 8% for 30-year fixed rate loans, the decline in financing ability is inevitably affecting more than just homebuyers. It also hurts sellers.
Good news? A blast from the past doesn’t have to be a cringe-worthy photo that looks like it came off the set of Hairspray. There are a lot of great throwbacks worth revisiting. We’re going “back to the old school” to look at proven methods to help buyers and sellers alike in the high interest rate environments of the 80’s and 90’s.
Old School Concept #1: Estimable Mortgages
Can I market my home with an underwritten loan? FHA and VA loans, as well as many others, have this option, so it’s worth asking your lender directly if this is an option for you. In a market where interest rates are just over twice what he was three years ago, this is a huge difference that affects how much a buyer can afford.
Old School Concept #2: Seller Financing
Many sellers will agree to loan you at a lower interest rate than your current interest rate. This could be from home-generated capital or other sources of seller means. The terms of the loan are negotiated between the buyer and seller, and the loan is formed through a local escrow company and title is vested.
Old School Concept #3: Interest Rate Buydown
Sellers can offer interest rate buyback credits when marketing a home. Buyers can also explore this option without being offered upfront and, as part of their offer, ask the seller for a credit to buy down their interest rate to make their monthly mortgage payments more manageable.
We asked local lender Brandy Marshall of Guild Mortgage to provide us with more information on this matter. As she explained, each buyer’s needs are different. “Credit can range from 2% to 9%, depending on the program and down payment. You could potentially save up to hundreds of dollars a month,” says Marshall. “Temporary buydown and permanent buydown options. If interest rates drop, you can always consider refinancing to lower your interest rate and payments.”
“Wow! There it is.” Some of the real estate tools of the ’90s may still be useful in today’s situation.
Are you a seller and want to encourage buyers to write offers on your home? If that’s an option for you, consider the above options for marketing your home to stand out from your competitors and expand your buyer base. Please consider incorporating one of the following.
Are you a buyer but don’t know about these options offered in the marketing? Look into them and don’t be afraid to ask the seller! They may not have considered it But really, that’s an option they might want to consider. This takes home sales back in time, and for many, this is an unfamiliar concept.
There are always homes for sale regardless of market conditions. The difference is whether you adapt the method to get the final result.
Written by Michelle Morris and Nicole Zaborsky, real estate consultants at Ascent Property Group in South Lake Tahoe, California.