Two situations that show the difference between the old and new markets.
Today we have an important message for anyone looking to buy or sell in our market. The current market is very different from the one we had three to six months ago. We want to paint a picture of what’s going on by comparing the past to the present—we think you’ll find the comparison interesting.
Three to six months ago, a $200,000 house might sell for $235,000. Interest rates were about 3.5% back then. The buyer in this first situation waived all their inspections, offered a $5,000 appraisal gap, and paid $5,000 toward the seller’s closing costs. They let the sellers stay in the home for 60 days after closing and take the new fridge that they just bought. The buyer closed in 27 days, which is a quick turnaround. Their offer gets accepted, and their new monthly payment is $1,428 per month.
Interest rates have risen in our current market, but what about everything else? In the second scenario, the buyers buy the same $200,000 house. They pay $210,000 instead of $235,000, but they’ll have a higher interest rate of 5.5%. They feel like the home will appraise, so they don’t offer gap coverage. They do an inspection for informational purposes only, and each side pays their own closing costs. They close in the typical 40 days and give the seller only 10 days to vacate their home. Their monthly payment is $1,538.
Yes, that monthly payment is $110 more than what the buyer got, but pay attention to everything else: The second buyer didn’t pay for an appraisal gap or cover any seller closing costs, so they have $10,000 more than the first buyer. Let’s say the second buyer takes $6,000 of that extra money and uses it to buy down their interest rate to 4.65%. That makes their monthly payment $1,440, which is only $12 more than it was for the first buyer.
On top of that, they used the $4,000 leftover to cover the costs of future home improvements that every buyer needs. They saved an extra monthly payment by not letting the sellers stay so long after closing, and they also kept that new fridge, saving the buyer $1,800. Their inspection also found mold in the attic, and the sellers decided to take care of that mold since they would have to disclose it anyway if they put the home back on the market, saving another $1,200.
In total, the second buyer saved about $33,000. The sellers are also happy in both situations because they got more than the asking price in a very short time. Additionally, there is more inventory in our market now, so the sellers in the second situation would have an easier time finding their new house.
We’ve been wanting this market to balance out for months, and now we’re starting to see signs of that. Don’t let higher interest rates scare you away from buying or selling. We are still making great deals every day.
These situations are obviously hypothetical, but they are very true to what we’re seeing today. If you want to buy, sell, or do both, please call or email us. We would love to help you make a plan to achieve your real estate goals.