In the current state of the economy those of us in the real estate industry need a big boost of confidence. We are viewed by our clients and customers as neighborhood experts, real estate experts, to get sage advice and, mostly, to hear something different than what is being fed to them daily. What should we tell our clients: To answer this question, plan on telling the TRUTH!
Here are some facts: Interest rates depending on credit scores for a 30-year-fixed mortgage are at 5.9% to 7.2% (source: Bankrate.com). There is a ton of inventory to choose from; and prices are extremely competitive. We should all take a page out of the stock market: buy low and sell high. This applies to everything including real estate.
Is there a credit crunch? Yes! But it doesn’t mean there is no money because real estate closings are happening; it just means buyers have to work a little harder and should have a down payment (at least 3.5% for FHA loans). There are opportunities in short sales and foreclosures which can pose a challenge, but they are also great opportunities. For the sellers, here’s an opportunity to make your place not only competitive when you price the home; but also with some staging, it can stand out on its own. Here’s an opportunity to work with past clients who are at-risk and help them stay in their homes; for this too shall pass.
Today’s marketplace it’s all about LET’S MAKE A DEAL!
4 comments:
With the market in the current state, what advice can you give to homeowners who are thinking about refinancing their home?
“Let’s make a deal”…well that may be difficult for most sellers. Even the most sophisticated investors purchased high. Now they can’t afford to sell low. I’m excited that the real estate market is correcting itself forcing the sales price down to more reasonable amounts. Homeowners must remember that real estate is an investment that typically takes years to capitalize upon. It’s the old school investors that have been in the game for decades that will win in this economy. It’s no longer about flipping and making quick money through short term investments. It’s about being a sophisticated and patient investor that seeks long term rewards by holding and improving real estate property.
For those thinking about refinancing their home, it depends soley on your current situation. With the state of the current housing market, more people are staying in their homes longer and coming up with long-term strategies. Because of this, if you have an unconvential mortgage (such as an ARM, interest only, etc.) the numbers may work in your favor to refinance.
Once you've determined what your refinancing costs will be, you can then determine how long it will take for your refinancing to pay for itself. To do so, divide the total of the points and closing costs that you paid by the net monthly savings that the new loan provides you. Your net monthly savings will be your interest savings less any PMI premiums and tax advantage losses expressed as monthly figures.
For example, assume you refinanced $200,000. You paid two points and total closing costs of $1,800. You got a great interest rate on the loan, so you'll save $80 a month in interest charges. However, your PMI premiums are now $10 per month higher, and you've lost tax savings of $120 a year, or $10 per month. Your refinancing costs are $3,800--two points of $1,000 each and $1,800 in closing costs. Meanwhile, your net savings are $60 per month--$80 per month saved interest less $10 per month increased PMI premiums and $10 per month lost tax savings. If you divide $3,800 by $60, you'll find your refinancing will pay for itself in a little over 63 months.
Real Estate is definitely an investment. You can look at it from the standpoint as another layer of your investment portfolio for retirement. I also agree and appreciate the "flipper" mentality is almost absent from the market and the true investors that are thinking long-term are back.
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