Homeowners Insurance vs. Title Insurance

originally published by Old Republic Title Co.

Purchasing a home can be one of the most exciting experiences in life and making sure your new investment is protected should be top of mind. Whether you’re buying your home in cash or taking out a loan, purchasing both homeowners insurance and title insurance is the best way to make sure your home is protected for years to come.

But what is the difference between homeowners insurance and title insurance? And why do you need both?

The short answer is that homeowners insurance protects you from what might happen, while title insurance protects you from things that may have already happened but are unknown or hidden. Both can have significant financial impact on homeowners, so let’s explore them in more depth.

Homeowners Insurance

Many people are familiar with the benefits that homeowners insurance provides. This is a policy the homeowner pays monthly, quarterly or annually that includes coverages that may help pay to repair or replace your home and belongings if they are damaged by certain perils.

Homeowners insurance may cover things like:

• Damage to the contents of your home

• Theft of personal property in your home

• Living expenses if your home is uninhabitable

• Damage to your home caused by fire, hail, windstorm and vandalism

• Personal liability for bodily injury or accidents to guests in your home

• Structural damage to your home or detached structures

Homeowners insurance may cover damage sustained to your home or its contents due to a natural disaster, but states may vary in how they address a natural disaster. You may be able to add additional coverage to a standard policy for things like earthquake or flood insurance.

Title Insurance

On the other hand, title insurance is a way to protect yourself from financial loss and related legal expenses in the event there is a defect in title to your property that is covered by the policy. With title insurance, title examiners review the history of your property and seek to eliminate title issues before the purchase occurs. Title insurance also differs in that it comes with no monthly payment. It’s just a one-time premium paid at closing.

Title insurance covers things like:

• A defect in title caused by forgery, fraud, undue influence, duress or incompetency

• A defect in title caused by undisclosed prior mortgage or other liens

• No right of access to and from the land

• A defect in title caused by improper execution of documents

• A defect in title caused by documents not being properly filed, recorded or indexed in the Public Records

Before issuing title insurance, your title company will perform an exhaustive title search to determine that the property is free and clear of encumbrances or defects. If anything is found, these title issues should be addressed before you buy the property and title insurance policies are issued at closing. Despite this title search being performed before closing, the most skilled title professionals may not find all problems associated with a property. Some risks, such as title issues due to filing errors, forgeries, or undisclosed heirs, are difficult to identify. This is why purchasing title insurance is important.

If you are purchasing your home with help from a lender, they will likely require you to purchase a lender’s title insurance policy. There are two types of title insurance policies:

A Lender’s Policy: This policy is what your lender often requires you to purchase. Because your lender has an interest in the property until you pay them back, this policy protects only your lender from valid claims on the title to your property. This covers your lender for the amount of your mortgage loan.

An Owner’s Policy: This policy is what protects you in case someone makes a valid claim on your property. This is an optional purchase that covers you for as long as you or your heirs own the property. This policy covers you for the purchase price of your home.

Carrying both homeowners insurance and title insurance play an important role in keeping your investment protected. Old Republic Title does not sell homeowner’s insurance.  However, if you would like to purchase title insurance when you buy your home, learn more about title insurance, or find out if title insurance is worth the cost, contact your local Old Republic Title representative today.

6 Things That Might Make Your Property Taxes Go Up

Originally published on Architectural Digest

How much should you put down on a house?

Published April 28, 2021

by Better.com

What You’ll Learn

What factors go into determining an ideal down payment

How your upfront costs can impact long-term savings

Why 20% down payment minimums are a thing of the past

How much should you put down on a house?

Unless you're part of the 25% or so of homebuyers who elect to put in an all-cash offer, you'll likely need a mortgage (and a down payment) to buy a home. A down payment is the amount of money you pay upfront to buy your home, with the remaining balance (known as the principal) funded through a lender. 

Down payments are expressed as a percentage of the total purchase price, and 20% is often touted as the must-have amount for any prospective homebuyer. While this was the benchmark once upon a time, these days there are more flexible funding options available—it’s no longer a “one-size-fits-all” scenario when it comes to down payments. Instead, it’s about finding the amount that works best for your homebuying budget. Here’s what you should keep in mind when deciding how much to put down on a house:

Mortgage down payment requirements

While a 20% down payment comes with some clutch benefits (namely, you can avoid paying private mortgage insurance, or PMI), different types of loans offer different down payment options ranging between 3–20%. Conventional mortgages typically require down payments between 5–15%, FHA loans are backed by the government and require as little as 3.5% down payment, and others—VA and USDA loans, for example—require no down payment at all! Especially for first-time homebuyers, loans with smaller down payments may be more financially palatable. 

However you’re funding your down payment—savings, assets, a cash gift from generous relativesnever hurts—deciding how much you can spend upfront is pivotal to the purchase process. You can’t really start making offers until you have that number set and pre-approved with your lender. In the days after you make an offer on a home, you should be ready to part with some of this payment. An earnest money deposit, also referred to as a good faith deposit, is usually paid during this time to signal your commitment as a buyer and typically equates to 1%–2% of the purchase price. At the closing table, your earnest money deposit will be put toward the down payment. This is also when you’ll pay the remainder of the down payment and any other closing costs. 

What is the average down payment on a house?

A typical down payment in 2020 was just 12%. But the exact number that’s right for you is determined by your financial profile, your budget, and your homebuying goals. As the biggest upfront cost of buying a house, your down payment impacts the affordability of your loan, your monthly payment amount, and your interest rate. 

As a general rule, a bigger down payment comes with some key benefits. Spending more on your down payment means you pay less in interest, either because you qualify for a lower rate or simply because the principal amount that’s used to calculate your interest payments will be smaller. It can also give you a competitive edge as a buyer and borrower—larger down payments signal savings and financial stability to lenders, which can equate to less risk; on top of that, offering more money upfront reassures sellers that you have plenty of cash to cover closing costs and other expenses associated with the purchase of a home. 

How lenders see your down payment

Credit, income, assets, and debt. Lenders look at all these factors to figure out how much money they might be willing to lend you. The size of your down payment will impact the loan terms a lender offers you, particularly your interest rate. For example, your lender might require that you make a higher down payment to offset a lower credit score. Conversely, if you don’t have much money saved or just don’t want to lay out a bunch of cash upfront, a strong credit score might help qualify you for a smaller down payment. 

Your down payment helps determine your loan-to-value (LTV) ratio, which is a measure that lenders use to assess the risk of a mortgage. To calculate the LTV of a particular loan, just divide the amount of money you borrow by the appraised value of the property. Let’s say you’re buying a $300K house with a 10% down payment of $30K. Divide the loan amount ($270K) by the value of the home ($300K) to get an LTV of 90%. The more money you have to invest upfront, the higher your equity or “ownership” in the home will be from the get-go. A lower LTV means reduced risk for lenders, and typically qualifies your loan for more competitive interest rates which can reduce the monthly cost of your mortgage. 

How to calculate down payment on a house

Maybe it goes without saying, but you shouldn't plan to drain your entire savings account on a down payment. Not only are there other upfront costs associated with buying a home (closing costs can be 2–5% of the loan amount), but you also need to consider the other financial obligations in your life. So how much should you plan to spend upfront? The type of loan you choose, your cash savings, as well as your pre-approval will indicate ballpark figures for your ideal down payment amount. Beyond that, here are the most important factors to consider:

Short-term affordability

Putting more money down upfront has its appeal, but overextending on a big down payment isn’t the right call if it’s going to create unmanageable financial strain in the here and now. Be sure you’re budgeting for other expenses in the homebuying process like closing costs, fees, and moving expenses; beyond that, consider how other upcoming costs—travel, a new car, starting a family, saving for retirement—might factor into your down payment decision. 

Monthly mortgage payments

Your down payment is a one-time, upfront cost, but it will have a recurring impact on your mortgage for years to come. It’s important to consider the long-term feasibility of that monthly cost when choosing your down payment amount. Once you know how much house you can afford and the types of loans available to you, you’ll be able to see how increasing or decreasing the size of your down payment amount can impact the monthly cost of your mortgage. 

Interest rates

Along with homeowner’s insurance and property taxes, your loan principal and interest rate are primary factors in determining the affordability of your monthly mortgage payment. Putting more money toward your down payment can qualify you for better interest rates, which can equate to significant savings over the life of your loan. Just make sure you’re looking at the impact of these savings in the long-run and comparing them to short-term costs. 

In addition to paying more in interest over time and making higher monthly payments on the principal/interest, the loan with the smaller down payment is subject to recurring PMI fees until the LTV ratio dips below 80%. You’ll save more over the life of the loan with a bigger down payment. On the other hand, saying goodbye to $60,000 in one fell swoop might make it difficult to sock money away for other important financial obligations like retirement savings or to deal with unexpected emergencies such as losing a job. 

You might decide that you’re comfortable with the higher monthly amount, and that more expensive interest costs/PMI fees are worth it for the chance to buy a house and start building equity. However, if you can only afford to spend 30K on your down payment (or some other set amount) and you want to reduce the cost of your loan, it might be worthwhile to look at less expensive houses where your upfront investment will equate to a larger percentage of the purchase price. (A $30,000 down payment goes a lot farther on a house listed for $220K than for $300K.) Either way, the right down payment will make it possible to manage monthly costs without taking on unreasonable financial risks.

Just Sold!

SOLD! This was a special one for us, as we helped a good friend purchase a beautiful home in the beautiful historical district in Oxnard. We can’t wait to drive by the home on Candy Cane Lane during Christmas! Do you know anyone looking to buy or sell? @thelashleygroup can help!

For any real estate questions or inquiries, feel free to reach out to Ian Lashley at ian@thelashleygroup.com or Jamie R Lashley at jamie@thelashleygroup.com

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Higher Production Prices Sting Builders and Homeowners Alike

By Jordan Grice (courtesy of RIS Media)

The impact of higher building material costs is going to be palpable in real estate as experts say price tags for newly built homes reflect a mix of factors from pandemic-induced to potential inflationary circumstances.

“Costs are definitely higher,” says Robert Dietz, chief economist at the National Association of Home Builders (NAHB). “The best advice to buyers and renters is to be strategic in terms of how you approach the housing market right now.”

Rising material prices and supply chain shortages dropped builder confidence for newly built single-family homes to its lowest level since August 2020, according to the recent reports from NAHB.

Dietz says material costs in aggregate were up at least 20% YoY, but individual prices for different materials have seen triple-digit growth over the past year and half.

“That’s easily adding about $36,000 to the price of a single-family home, and probably adding about $120 to the rent of a typical apartment when those costs are fully phased in,” he says.

Builder Challenges

While builders are doing their best to deal with the issue, sky-high costs of building materials continue to challenge their efforts, leaving some concerned for the future of the housing market.

That’s been the case for Boise-based builder Steve Martinez of Tradewinds General Contracting.

“At some point when the market does stop, pause or cool off, who’s left holding the bag?” Martinez asks. “You’ve got many builders that are either not committing to a contract price with clients, or they are only looking to build spec homes because they don’t know what their costs will be, which takes inventory off the table.”

While every material has gotten more expensive, Martinez admits that softwood lumber has been a more considerable challenge to new construction.

Lumber mills across the country overestimated the decline in housing demand during the pandemic’s early days. As a result, the unexpected surge in demand for building materials amid the 2020 remodeling boom and pandemic relief-induced wealth blindsided companies.

“Unfortunately, they rolled the dice, and they rolled it wrong,” Martinez quips. Housing only exploded after the pandemic hit, specifically states like Idaho where we had a huge influx of out-of-state people moving to get away from the more metro areas.”

While pandemic-induced factors sparked the triple-digit gains, lumber prices have been an issue for builders for the past two or three years due to high tariffs on softwood imported from Canada.

Roughly 30% of the lumber used in U.S. homebuilding comes from Canada, which currently has tariffs at 9%. There is a chance that could double, according to previous announcements from the U.S. Commerce Department.

“Our estimate on the producer price index is for about a 6% gain in 2021, but then some of those cost pressures should ease as we head into 2022,” Dietz says. “The reason for that is that we expect a lot of growth this year—ultimately in additional supply that will help to tame the price growth.”

Builders made a small dent in the considerable deficit contributing to the frenzied for-sale market, according to Danielle Hale, senior economist at realtor.com®.

“Even though we’ve seen a little bit of moderation in the housing market in response to higher prices, the reality is that there is still a lot of unmet demand from homebuyers…trying to meet that shortage is the biggest thing that we can do to keep the housing market moving forward at this time,” Hale says.

Housing starts rose 3.6% from last month overall and 4.2% for single-family homes. Year-over-year starts rose 50%.

According to Hale, challenges rose in single-family homes’ completion rates, which dipped below 1 million for the first time this year.

“Builders can get started, but these materials cost challenges are making it difficult for them to get them finished ultimately,” Hale says.

Price Hikes and Building Struggles

Economists think it’s a bit too soon to tell, but potential inflation increases this year could add to the price growth in the housing market.

“It’s just like a wait-and-see period for inflation,” says National Association of REALTORS® economist Nadia Evangelou. “The Fed already reported that they think this inflation will be temporary…Even though mortgage rates typically rise when inflation increases, this isn’t what is happening right now.”

According to recent projections by the Federal Open Market Committee, economic growth and inflation are rising higher in 2021 than expected.

The median estimate of annual inflation rose from 2.4% to 3.4% in March, while the median estimate of unemployment remained unchanged at 4.5%.

Housing demand will likely remain strong in 2021 and head into 2022, according to Evangelou, who also expects home building to ramp up during the summer. Although inventory is still low, she anticipates roughly 10% more for existing-home sales and 20% more for new single-family home sales.

It’s still uncertain whether the inflation in the housing market will be short or long term. Brokers expect it to fall somewhere in the middle as the economy rebounds and new inventory enters the market.

“We’ve seen higher home prices and dramatic price increases, to the tune of double-digit increases over the last couple of years,” says Mike Pappas, president and CEO of The Keyes Company in Florida.

That could bode well for the real estate market overall, but Papas says buyers will need to watch interest rate increases for a better picture.

“People are asking if it’s transitory or sustainable inflation,” he says. “There is no question that we are seeing short-term [inflation]. It’s undeniable to say that we haven’t had inflation or price rise in the short term in many sectors.”

Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to jgrice@rismedia.com.

Here’s How These First-Time Home Buyers Are Making It Happen in California

By Realtor.com Creative Studio

Originally published: https://www.realtor.com/sponsored/california-first-time-homebuyer-stories/

“California has everything that makes life fun, interesting, and enriching,” reports Chris Hauty, a screenwriter and novelist who, after a decade of renting, recently became a homeowner in Southern California’s Chevy Chase canyon. For Chris and buyers like him, who’ve long dreamed of owning a home in the Golden State, REALTORS® are helping them make it happen. We checked in with a few of them to hear more about their home buying process and the pro tips they picked up from their REALTORS® along the way.

“We’d love to find a home with more rooms and a yard for our kid,” report Jorge Del Pinal and Leyla Tirgari. The couple, along with their young son, Cyrus, are certainly not alone in their hunt for a new home in Southern California’s ultra-competitive housing market. They’re currently in the thick of their house hunt in and around Southeast Los Angeles, scanning listings daily, while also utilizing online tools to keep abreast of an ever-changing market with the diligence required to become a homeowner.

The couple is optimistic, spurred by the help of an expert agent, fixed-mortgage interest rates at historical lows, and of course, the dreams of homeownership in a state promising a wide definition of the good life.

“We love Los Angeles and California because of the variety of experiences uniquely available here,” says Jorge, “The state has so many beautiful places to explore, and the homes here have yards you can actually use and enjoy for most of the year.”

It’s a sentiment shared by John Gutierrez and Tiffany Lee, a pair who recently successfully navigated the competitive market with the help of their REALTOR® to eventually set roots in Eagle Rock, a suburb with a “quaint town feel.”

“Before ever seriously considering buying, we’d casually attend open houses in Eagle Rock … it felt like a pipe dream,” remembers John. Fast forward nearly two years, and they've moved into the “most dreamy fixer-upper,” one with a large yard that the pair plans to transform into a hangout for hosting family and friends. And though true fixer-uppers can be tricky to come by in this market due to high demand for these properties from investors, considering a place that needs some work can make great sense for some buyers.

John and Tiffany made it happen with a combination of patience, luck, and the help of a pro. “Given how competitive the market is,” they say, “having a stellar agent with all the connections really will make or break your experience.” The couple emphasize the importance of finding the right REALTOR®, one not only conscious of a buyer’s needs, but also capable of navigating the market to make those hopes become a reality by presenting overlooked opportunities. “Who knows, we might still be house hunting right now if we hadn't found the right agent!"

Buyers value potential and personalization over instant gratification

Today’s generation of home buyers—whose TVs and social feeds are full of renovation programs and aspirational before-and-afters—embrace the long-term investment and efforts required in turning a house into a home uniquely their own. Patrick Laurance, a recent home buyer in the seaside community of Point Loma in San Diego, celebrates the opportunity to “add on, develop and upgrade” his newly purchased Spanish Revival style home to his heart’s content. "I decided to buy because I knew it was a great long-term investment,” notes Patrick, “But I also thought once the COVID lockdown hit it could be fun to design and fix up a home over time.”

Patrick notes that it was thanks to his agent that he was able to secure the deal among 15 other offers. “I would highly recommend working with an experienced agent,” he says. “Winning a deal in this market is so competitive, and they really go above and beyond to educate you and help you win.” And with historically high demand in play with median time of homes on the market only spanning a mere eight days, Patrick echoes Tiffany and John’s sentiment about working with a REALTOR® with established local connections to make best informed and timely bids, while also providing guidance about unforeseen costs such as property taxes and home insurance. “My agent's strong relationship with listing agents in the San Diego marketplace made all the difference.”

Similarly, Cesar and Chommany Chavez’s agent helped them land their new Vallejo address in Northern California by guiding them toward listings that would complement their outdoor entertaining lifestyle. They decided to dive in, convinced by their eventual home’s spacious backyard and its potential for entertaining guests. “We’re believers in taking our time and trusting the process.” For those new to home buying, that process may include REALTORS® guiding buyers toward securing a mortgage pre-approval before ever making a bid, and also investigating eligibility for one of the numerous down-payment assistance programsavailable only to first-time home buyers.

Of course, not everyone is looking for a renovation project. Some prefer the immediate gratification of moving into a home already outfitted with a certain level of finish and features all ready to enjoy upon entering their new home. Chris Hauty knew his busy work schedule would not allow him time to take on any large remodeling projects. Knowing this criteria, his agent was able to find him a Glendale residence designed and customized by its previous homeowners to such an exacting standard that he’s more than content to leave it as is.

“The [previous owners] were an architect/builder husband and wife team, and they created a beautifully designed space that is exceedingly well put together,” says Chris, “This is a tightly finished house, something I much appreciate.”

Homebuyer’s homework

While there is always the rare possibility of finding a home that checks off all of the boxes, it’s vital to prioritize what's most important. Compromises are likely.

Patrick’s advice to first-time home buyers is to lean on your agent for their expertise when it comes to making tough decisions. He says that while “purchasing a home can seem like a scary undertaking, having knowledgeable people around you takes the pressure off.”

“I liken home buying to online dating,” says Chris, “Once you decide to jump in the market, go in with both feet.” Chris also emphasizes the importance of intelligence gathering and driving around potential neighborhoods beforehand to enter the market as an informed buyer.

John Gutierrez notes the greatest attribute required of any home buyer in California today can be summed up in one word: patience. When you have the right team of experts supporting you, sometimes it takes trust that, like in John’s case, they will help you secure the right home. “We walked through over 50 homes and offered (and countered!) on 12 homes. The roller coaster of emotions is real,” he says, “so expect a ride.”

While Jorge and Leyla are still on their ride to find their dream home, they share one particularly helpful bit of advice—one reflecting how technology has changed the game for both buyers and sellers, especially during a pandemic: “We now record video of any property we visit and re-watch them at home. There was one place we really liked we were seriously considering, but after viewing our video again we realized the house was a lot darker than we remembered. We also text videos to friends or family to get their immediate second opinions … it’s sometimes fun to share memorable staging or the unusual stuff we’ll occasionally see while shopping for a home.”

New Details of First-Time Homebuyer Grant Emerge: Who Qualifies?

Published by RIS Media - Article By Liz Dominguez

The industry has been eagerly awaiting further details about President Joe Biden’s proposed first-time homebuyer tax credit—which originally featured a max of $15,000 per buyer toward their down payment on a home.

The House Financial Services Committee recently released the latest draft of the proposal, called the “Downpayment Toward Equity Act of 2021.” The first note of significance? The proposal comes in the form of a grant, rather than being structured as a tax break or refund.

Here’s what you need to know about the latest proposal:

Funding Source and Distribution Formula

There’s not currently an amount set in terms of funding. Congress will have to debate about the amount of funding they find acceptable for fiscal years 2021 – 2030. However, assistance limits are currently up to $20,000 per homebuyer (or up to $25,000 if the homebuyer qualifies as a “socially and economically disadvantaged individual”).

The Department of Housing and Urban Development (HUD) will be allocating the funds. Of the total funds provided each year, HUD is required to use at least 5% to support housing counseling activities.

Funding will take into account each state’s population, median area home prices and racial disparities in homeownership. Any unused funds will be reallocated by HUD at the end of each year to states that show they are in need—but only if they meet the Treasury’s program goals.

How Can the Grant Can Be Used?

According to the proposal, funds must only be used to help homebuyers purchase a home. Assistance can go toward a down payment or the closing costs, or to reduce the interest rate on a mortgage.

Funds can be used with the following mortgages:

• One that is eligible for purchase by Fannie Mae or Freddie Mac

• One insured by the FHA or USDA

• One that meets the definition of a qualified mortgage

Who Is Eligible?

While the grant is for first-time homebuyers, those who have not owned a home in three years may be eligible.

Even homebuyers receiving assistance from federal, state, local, private or nonprofit sources may still be able to receive a grant.

Grantees must meet income requirements and qualify as “first-generation” homebuyers. This means they are individuals whose parents have:

• Never owned their own home during the homebuyer’s lifetime.

• Previously owned a home during the homebuyer’s lifetime but lost the home to foreclosure, short sale or deed-in-lieu, and no longer own a home.

Homebuyers who lived in foster care may also qualify as a first-generation homebuyer.

Additional Rules

In order to receive the grant, homebuyers must complete a home purchase counseling program through a HUD-approved agency. States may be able to waive this condition for homebuyers who meet specific HUD-approved underwriting criteria.

Homebuyers who stop occupying their home less than a year after they purchased will need to repay the entire grant. This amount decreases by 20% for each year they live in the home, with no penalty occurring after five years. The penalty would also be waived for home sellers who realize a gain on their sale that is less than the amount they owe.

This draft is simply a kicking-off point to begin discussions. To pass the grant program into law, a bill will have to make its way through both houses of Congress, which could mean further revisions.

Zillow released a report in March finding that a $15,000 tax credit could cover the entire down payment for homes in 40 of the 50 largest U.S. metros. The company found that with a 3.5% down payment on a 30-year mortgage with a 3% interest rate, about 9.3 million renter households in the U.S. (27.4%) would spend less than a third of their income on the monthly payment for the median home sold in their metro in 2022.

This is a developing story. Stay tuned to RISMedia for updates. 

Liz Dominguez is RISMedia’s senior online editor.

3 Tips for Buyers in Spring 2021

Content published from RIS MEDIA. By Mark Mathis, VP of Sales for Homes.com

In 2020, we saw an unprecedented shift in the housing market. In fact, many are referring to it as “The Great Reshuffling,” since many moved from large cities into smaller towns when working from home became the norm. This ripple effect has continued to affect the market into 2021, and swarms of people are looking to buy.

With a large number of people moving into the market, it’s going to be a challenge for buyers to find homes in this competitive market. Coupled with spring selling seasons, buyers should be as prepared as possible and consider all options when looking for their new home. Here are three tips to get your buyers ready to find a home this year.

1. Consider the Long-Term

Because the way we live and work has been so affected, many are realizing that they aren’t tied down to a particular location anymore. Because of this, they’re using the pandemic as an opportunity to move somewhere they’ve always wanted but haven’t been able to in the past. If you’re working with a client like this, talk to them about their long-term plans. These could include needing office space because their company has transitioned to permanently working from home or another room to use as a home gym or baby room. However, it’s important to remind clients that now is not the best time to look for a fixer-upper property. While construction materials are already spread thin due to the pandemic, many contractors are also overbooked because of a rise in demand, both due to the booming housing market and backlog from last year’s shutdowns.

While buyers should be thinking about the kind of space they need, they should also think about how long they plan to remain in that location. If they’re only looking to move because they’re afraid of missing out on the housing opportunity, this probably isn’t the best time for them to relocate. Because it’s a seller’s market, many home prices may be inflated. However, if buyers plan to be in the area long enough to capitalize on their housing investment, it would likely be worth it to move.

2. Focus on Financial Preparation

While many are looking at buying a new home because interest rates are lower than usual, this is going to be a short-term dip. Eventually, rates will return. Remind clients that, while it’s always necessary to consider their budget before looking at homes, this is especially important now, as the economy is still in flux and lenders are stricter.

Especially when it comes to first-time buyers, encourage them to think about how much they’ve set aside for a down payment and what they can realistically afford in monthly mortgage payments, their potential mortgage rate and other property expenses. Let them know that lenders will review their income, credit history and debt, so they should avoid making any other large financial decisions in the immediate future if they’re planning to move soon.

Currently, another financial issue is a potential bidding war. Because there is a higher demand for houses than what’s available on the market, the chances of multiple bids on a property are high. One way to combat this is by challenging your clients to reduce their budget and look for houses around $50,000 less than their original idea. This way, if there are multiple bids, they’re still able to stay in the game because they haven’t maxed out their budget. Other ways your buyers could appear more attractive to sellers are by offering terms like “fast close” or writing a compelling buyer letter. However, one of the best but most challenging ways for buyers to come out on top is by giving an all-cash offer.

3. Examine the Timing

While the spring is already the busiest time in real estate, the lack of inventory and demand for properties will make this year even more hectic. Interest rates have been low and are currently rising, but they’re not likely to drastically increase immediately. During this time, neither first-time nor experienced buyers seem to have the upper hand. While experienced buyers may be more familiar with the process and be able to offer more money, first-time buyers aren’t attached to another property which means they may be able to close more quickly. Some of your buyers may not be in the right place to make this move and, as their agent, it’s important to do what’s best for them.

Ultimately, if it’s better for your clients to wait, be sure they keep you top of mind when it is time for them to buy. Add them to a drip campaign that gives them tips to financially prepare and make themselves more attractive to sellers, so they can be ready to move immediately if everything lines up. You can also ask them to follow you on social media, where you can give general updates about the market. Finally, keep them in the loop by informing them about new listings as they become available in case their perfect home comes up sooner than they thought.

While this can be a challenging time in the market, it’s not going to last forever. Ensure that you’re prepared now by staying connected with buyers and sellers in your area. Check out Homes.com Local Connect to learn how you can reach active buyers and sellers searching homes in your zip codes!

Mark Mathis is vice president of Sales for Homes.com. For more information, please visit marketing.homes.com.