Sellers and buyers are currently experiencing very challenging times. It would still seem like an opportune moment with the lack of inventory for sellers to consider placing their homes on the market. Although the environment is definitely slowing, there still appears to be a sufficient number of qualified ready-to-buy purchasers out there searching for their next place to call home.
Ah, but as we all have been experiencing, the Federal Reserve has been increasing our economy-killing interest rates, not seen since 2007. This has made it much more expensive to purchase and buyers have had to contemplate and rethink their plans about their needs and wants. Many have conveyed to me that they are considering downsizing in order to afford and be able to purchase a home, some are staying where they are and some are leaving New York altogether.
Having some ah-ha moments by taking a step back will be tantamount and necessary in trying to purchase. Providing some creativity and having a new game plan by thinking outside the box will be necessary, which most didn’t have to consider when rates were considerably lower at the beginning of the year. This will involve cooperation from sellers in a give-and-take environment to work with you in your purchase.
As a seller pricing your home correctly today is an ultra important facet in attracting as many eyeballs as possible to observe your listing online. This will hopefully lead those interested parties to schedule appointments and show up. Once you have a buyer making an offer that is acceptable to you, it becomes a starting point. Then your home needs to pass inspection as well as the appraisal from the buyer’s lender. Once it gets through the inspection, the contract is now executed by both parties and now you wait for the appraisal.
Knowing that your buyer already has the pre-approval from their lender based on their income, credit, debt/income ratio, etc. is a good start. But will the home appraisal come out in favor of the buyer so they will receive the necessary funds to finance their purchase? With more buyers walking away from their deals due to higher interest rates, sellers should consider assisting with some closing costs or credit back to the buyer to make the transaction proceed to a successful conclusion.
Another consideration would be to offer financing to attract more buyers. Moreover, as a seller, you may have substantial capital gains to pay, so providing a mortgage to the buyer, will be an excellent way to defer capitals gains over the length of the mortgage instead of a lump sum payment; as your income might be less in the future and so too could your gains.
I had a potential sale if the seller provided a mortgage. I went over the advantages and disadvantages of providing financing to our buyer. The seller agreed to a 5-year mortgage with a balloon payment or possible continued financing to be discussed six months in advance of the final payment. You should also consider strategizing your situation with your financial planner and CPA to determine if there are any other ways to save on the taxes you will eventually owe.
Also, gaining an above-average interest compared with what the banks are giving will be a plus. At the same time, this will save your buyer closing costs, a real win/win situation. You become the bank with a lien on the property until the mortgage is paid off. A sizable down payment should be discussed and considered so that in the event of any payment issues or worst case scenario, a foreclosure action, you will be in a stronger position. Having your attorney create a contract with precise stipulations, as to the payment due date w/grace period and strict penalties as well as dealing with any foreclosure actions to protect you will be of critical importance.
Today, it can be a “nail-biting” process to get through those processes and finally to the closing table. In this current market, you do not want to lose a sale and should be thinking with both parties in mind and being more reasonable in your expectations and demands as a buyer and seller that will enable a sale to occur benefiting everyone.
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Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S) as well as the new “Green Industry” Certification for eco-friendly construction and upgrades. For a “FREE” 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] or via https://WWW.Li-RealEstate.Com