Most consumers who were or are still looking to buy are somewhat aware of
what is occurring in our economy. Serious decisions for so many as to whether
to buy, rent or just sit tight where they are have come into play over the last
year as rates have doubled.
Even when the desired home is found and there is an agreed and accepted price between seller and buyer, this is the first step in the process. Next, an inspection needs to be completed to determine whether or not you are purchasing a “money pit” with thousands of dollars of additional costs creating an expense that you didn’t anticipate. Lately, most contracts are subject to an inspection, written mortgage approval and, of course, your attorney’s review of all documents
When the market was in a feeding frenzy, there were buyers who waived their inspection as well as the mortgage contingency, leaving them in a somewhat precarious position. This could be a real financial problem if any issues came about with the home or if they had to come up with more money if the appraisal was less than the selling price. Another question to ask yourself is should you lock in your interest rate right now anticipating another rate hike on Nov. 1?
With all that being said, you need to be much more cognizant of what you are
purchasing and the terms and conditions that you are agreeing to. Lately, I have seen that some sellers are now agreeing to a certain number of repairs or a credit towards fixing them.
A few smart sellers are beginning to offer short-term 5-to-10 year financing with lower interest rates, just to make a transaction happen. As demand has been reduced by higher rates, sellers must begin to think outside the box if they really have a need to sell. Then again, as I have mentioned in a previous column, those who might be hesitating to move due to leaving their low-interest mortgage for a new higher rate might find seller financing to be more advantageous with lower closing costs.
If you are a real seller who doesn’t need all the proceeds upon the sale, then this is an opportunity to consider and become creative and earn a greater return than what a bank or credit union is offering with much less risk than trying to be a stock picker in the current market. If you have substantial capital gains, providing your purchaser a mortgage, and spreading out your taxable gains over the term of the mortgage will enable you to not have to pay it all upfront.
You now have security by being a lien holder in the first position, similar to a bank. Also, if the buyer wanted to extend the mortgage, then the seller’s capital gains could be spread out even further. This situation could be a real win/win for both seller and buyer and allow more homes to be sold. I would suggest that you discuss this with your CPA and financial planner and strategize this in advance to know your options and the best path to pursue.
Throughout approximately the last 150 years real estate has returned on average 8%. But over the last 50 years a much higher return has been gained due to inflation and supply and demand economics, as per the Federal Reserve Bank of San Francisco (frbsf.org).
Obviously, past history is never a guarantee of your future returns. Timing the market to purchase will never work. You have to determine whether buying and building long-term equity or renting now and giving away money monthly (with increases), based on your family’s financial position and capability, is in your best interest in building long-term wealth.
Finding your first or next home in today’s environment may take longer, and realizing trade-offs will be part and parcel of the purchasing process. However, it is crucial for buyers and sellers to work with each other in a mutually beneficial, pragmatic situation so this can inevitably conclude with more very happy endings.
Tip of the Week:
As leaves are falling, they are beginning to clog your gutters and leaders. You
Will need to regularly remove and clean them as necessary or consider installing
screening or custom covers to eliminate the issue going forward. Clogged
gutters could create greater damage, by having water back up inside your soffits and then inside your walls later on. Also, if you haven’t already, cover or store all your outdoor furniture, gas grill, and hoses.
Continue to Donate to the Ukrainian Crisis and save a life or 2:
OR The International Organization for Migration a 501(c) 3 Corporation: OR:
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