It's Black Friday...and when it comes to real estate, everything seems to be on sale this holiday season. Getting a good discount on your largest purchase is the financial equivalent of fire sale pricing on a million everyday purchases. If you're the type who salivates over a 30 percent department store sale or the $4 in bonus bucks you get at the drugstore, these 5 Ways Real Estate is on Sale This Black Friday might literally put you over the moon!
1) Homes. Word on the street is that home prices have now rolled back to 2003 levels. That's right - if you're one of those folks who always thought you were born too late to get a great price on your home, 40 (or however old you are) is the new 32 (or however old you are minus about 7 years). Of course, remember, real estate is hyperlocal. That just means that it varies from market to market. It's a strong buyer's market everywhere, relative to five years ago, but what that means for your situation will vary from market to market. In San Francisco, that means prices only rose about 11 percent last year, not 30 percent, and buyers may only have to compete with 5 other offers, rather than 25. In cities that have been foreclosure hot spots, on the other hand, prices may have dropped by as much as 50 or even 60 percent since their peak, circa 2006. Everywhere, though, homes are on sale relative to what they were a few years ago.
Since most of your fellow Americans will spend their Black Friday shopping for iPhones and Pillow Pets, they won't be shopping for homes. The low numbers of active, qualified buyers hunting for homes during the holiday season may make some sellers even more motivated to negotiate a good deal with you! The latest Trulia price reduction report showed that a record-high 27 percent of homes listed for sale on Trulia as of November 1st had had at least one price cut - in some cities, 33 percent, 39 percent - even 46 percent of the homes for sale had already been discounted by their sellers. Sellers who are serious about getting their homes sold are putting them on sale this season.
Note to buyers - some homes' list prices already reflect a great discount. To know whether you're getting a good deal, check your negotiated sale price against the fair market value of the home (i.e., the recent sales prices of similar, nearby homes - ask your broker or agent to help you figure this out). It is not always the case that you must have a huge discount off the list price for a home to represent a good deal!
2) Property Taxes. Many a buyer isn't aware, but in most places and most cases, property taxes are determined by the price you pay for your home! So, if you get your home for a "sale" price, you'll automatically be getting a sale on your property taxes as well!
3) Interest Rates. So, last week, rates went up. We can no longer say they are at historic lows. But seriously, people - they are still sub 4.5 percent on a 30-year fixed; even lower on 15-year loans. Rates may not be the lowest we've ever seen them, but they are still very, very low. Chances that they'll stay that way through the holidays? Strong.
As we've already discussed, the holiday decline in numbers of buyers may motivate some sellers to cut good deals. What's more, sellers who have their homes on the market during the holidays tend to be the most motivated sellers anyway - less motivated sellers would rather not have buyers tracking rain and mud into their homes while they host holiday dinners and guests, or are trying to relax during their time off work. The best way to make your own sale on interest rates is to ask a motivated seller to "pay a point" for you. Some sellers might be willing to credit you the cash at closing to buy your interest rate down. Your mortgage professional can brief you on how much your rate (and, correspondingly, your monthly payment) will decrease for every "point" (1% of your loan amount) you pay; then, when you make an offer, include the amount you need to buy your interest rate down in your offer. Most brokers and agents would do this by requesting a closing cost credit that covers/includes the cost of the interest rate buydown.
4) Closing Cost Credits. More than most holiday buys, real estate costs quite a bit of money to purchase. There are loan origination fees, title insurance costs, escrow fees and even transfer taxes charged just for the privilege of buying a home. You know those Black Friday retailers who offer to pay the sales tax for you? Well, some home sellers take a similar tack, offering to cover some or all of the transaction costs their home's buyer will incur. Lenders vary, but most will limit the closing cost credit from sellers to 3 percent of the home's sale price; check with your agent and your mortgage broker about lender guidelines before you write your offer, if you plan to ask "your" home's seller to cover some of your closing costs.
5) "Included" Items. Some of the best Black Friday sale can include a bonus item the retailer throws in! Same goes for real estate; some sellers don't have much room to go down on the price, but may be able to include some personal property in the sale. Many buyers relish the thought of moving in to a home complete with new appliances, wall-mounted flat-screen televisions, furniture that suits the space exceptionally well. Some sellers get even more outrageous with this; I recently read a report of a Connecticut seller who threw in - get this - another whole property (their Florida vacation condo), with their home, just to get it sold. Check with your broker or agent and your mortgage pro to make sure any included items won't run afoul of appraisal or lender guidelines.
With all that said, neither the promise of a great deal, nor the fear of losing out on one! - should be the primary motivator for you making the massive life and financial commitment to buying a home. Buyers should move forward with the project of buying a home when - and only when - it makes sense for their lives, their vision of their future, their families, their jobs and their finances.
But if you've already decided you're ready to buy and have just been waiting for the bottom of the market, the weather to warm up or the mood to strike - these Black Friday (and Saturday, and Sunday) deals on real estate can be a good reason to activate yourself and put your home buying plans in play.
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