Math is your home selling friend. Especially when it's this simple!

Great post and something I think the media should do a story on for a real housing boost! I think I will reblog it to try and get the word out as much as possible. Something I have know but haven't been able to articulate like you have here.

I think this is a great time for anyone to buy if they can afford it.  Long term rates will go up. 

My buyer's agents use an inhouse search technique for the beginning of any buyers' search.  So adding this as a spreadsheet to their presentation may easily get their buyers off the fence and into the field as much more motivated buyers ... thanks!

You presented this perfectly.  It gives us great selling points and so simply put :) 

Ilona, numbers are logic and home buyers for the most part do not use logic, they use emotions and unfounded advice as their criteria.

Ty

When you can illustrate the justification to your clients as you've done, closing should be automatic, shouldn't it? Sometimes, it's better to utilize objects with your math so clients can actually see the information.

There are many agents who use this illustration to persuade their clients to offer a higher price if seller buys down the rate. That's why the rate or the price by itself isn't as important as the professional who educates and designs a plan most suitable for their client.

Ilona,

 Great rates + low prices = booming market!

This should be in every salesperson's arsenal of relpies and comments.

You have to take into consideration that they will need to sell at a lower price in order to take advantage of the purchase of a new home.  Somehow people don't make that connection.  They think they can't sell at the price they would need to, but they are anxious to buy a bargain!

Ilona, great post from a marketing perspective! I understand this is what you wanted to accomplish, and you did!

Now, I am engineer by training and would like to play devil's advocate for a moment:

"But overall I pay much more". In your example you focus on monthly payment, not overall debt or overall cost of money (interest). There were payments made against the existing mortgage, but the new mortgage would start at zero for the new 30 year term. Overall you pay much more just because you pay the monthly payment for 30 more years.

"But what if I refinance?". That's right. If the potential home buyers qualifies for a larger loan to buy a home, they most likely also qualify to refinance their existing loan. In an "apple to apple" comparison the home buyer needs to compare the cost of his existing home refinanced at a low rate to the cost of the mortgage for the home they want to buy. In this case it's cheaper to stay!

"I like leverage if it goes up". A 5% appreciation based on a $300,000 value is better than based on a $250,000 value. If it goes wrong and the home depreciates 5%, you just lost 25% of your home equity (assuming 20% down and fairly new into the mortgage). Remember, math says it can go both ways!

Don't get me wrong, I think your examples are good from a marketing perspective. Just be prepared to have some answers when you meet a person that plays devil's advocate as I did above.

claus212

I like the way you've presented this info.  Thanks!  Carrie

Great Post, I can get with the math flow....I wasn't very good with that in school either as some others have mentioned but it is good advice. Thanks

I am not  a math person but you made it understandable. Thank you.

If you are math challenged, try http://www.KhanAcademy.org

I've always enjoyed math, so it all makes perfect sense to me.

I think what buyers today need to look at is the fact that they're going to live somewhere and pay for a roof over their heads ...either in a house they're buying or a house they're renting.

And if they buy now, with interest rates and home prices low, they can probably buy for a monthly payment that they can pay comfortably.

That is, unless they decide to buy more house than they really need and saddle themselves with a huge payment... some people will always do that.

So now they're in a fixed rate mortgage and they know the payment can't go up - except for the property tax portion, of course.

As they (hopefully) advance in their jobs, their income should go up - making that mortgage easier and easier to pay as time goes on.

Meanwhile, those who are renting will be paying higher and higher rent each year. So their increased income will go to pay that additional rent.

Unless you plan to move out of the community in the next couple of years, buying a home makes a lot more sense than renting.

People that are fence sitting have been relating, "What if I buy and the prices drop further?" My comment is usually "Well, how long do you plan on living here? 6 months, a year, 10 years? They usually say more than 5 years or they don't plan on moving, to which I share "Most times you need to be concerned about whether the market values are up or down is when you are preparing to sell. Try not to get into speculation of markets when determining whether you want to purchase 'your new home'

Makes sense to me. Thanks for another arrow in my quiver.

Great info to show how interest rates really make a difference!  Bookmarked this one.