The world of real estate can be scary if you have no idea what you are getting yourself into. In this day in age where the internet is available to the fingertips of almost the entire population, it can appear that everyone is an expert. Suddenly anyone that has purchased a home or sold one wants to share their opinions. Unfortunately for those that do not know a whole lot about the industry, those opinions can be like beating hearts. Everyone has one. But, that does not mean that their opinion, or heart for that matter, is infallible.
The world watched the market crash in 2008, and because of this, the government has stepped in to regulate the industry. Gone are the days of the Wild West ways, and now the regulators have set parameters and guidelines to help buyers and sellers complete real estate transactions without the fear of blatantly, inflated home values and non-qualified buyers. They have added specifications as to how a home is assessed for value by the appraisers and what borrowers need to prove in order to obtain financing.
Understanding the real estate market is really as simple as understanding supply and demand. You have to know what the inventory looks like in the current market. Many consumers will turn to online resources to review the current listings that agents might find on the MLS (Multiple Listing Service). While these listings may not be completely up to date, you will still get a good feel for what is out there. You should be noticing similarities to your home such as location, style, bedrooms, square footage, upgrades, features, etc. These are good indicators of price point.
You have probably heard some real estate lingo thrown out there such as a buyer's market or a seller's market. This concept comes from understanding where the demand is.
When you were looking at the inventory for sale in your area, did you happen to notice how long the homes were on the market? If homes are selling quickly then you are looking at a seller's market. Buyers are eager, and sellers are having no issues receiving offers or even multiple offers. This is a good sign that it may be time to seriously start considering to list your home.
In a really aggressive market, we will see competing offers that go above and beyond the asking price of a home. This shows you that the buyers are motivated with cash on hand to get under contract and close transations.
Your biggest resource for information is going to be aligning yourself with the right real estate agent. Many homeowners attempt to list the home on their own to cut costs, but they are also opening themselves up to a longer carrying cost period and a lack of marketing that a real estate agent is going to bring. Real estate agents have the ability to perform a market analysis of your property against the recent home sales along with the other homes that are on the market. This is going to allow you to see a fair market price in which you will be able to list your home for. They will also be able to drive traffic to your property as they are connected to the buyers that may already be approved and looking in your market.
You will also want to consider evaluating the offers that have preapproved buyers. Some sellers make the mistake of only enjoying the excitement of an offer that they forget the most important piece. This opens the sellers up to more risk as the deal can quickly fall apart. Working with a real estate agent can help prevent some of the disasters that can happen throughout the process.
Now that you have agreed to list your home for sale, you will now be on the search for a new residence. The same motivation will need to apply in order to secure a new contract.
Much like the seller's market discussion, we are looking for the demand. If homes are staying on the market 60-90 days at a time, then we are looking at a buyer's market. The inventory may not be as high as it once was, and this gives buyers a little more time to be selective as to where their money is going.
This is crucial to understand if you are a first time homebuyer competing with seasoned investors. They are notorious for swooping in with their bells and whistles to close a deal quickly. However, you should not let this intimidate you. Work with an experience real estate agent to help navigate you through the process. (The seller pays for your real estate agent's commission, so do not stress over incurring additional costs.)
We are getting to witness one of the strongest real estate markets in history right now. We watched the real estate market crash in 2008, and because of this many consumers are left fearful of what the next few years might look like. Pricing has been advertised almost everywhere you look, but how does that translate into buying a home? This question presents an avalanche of questions once you start factoring in things such as the inflated contracts that we addressed earlier.
We cannot be blind to what is going on in the market, but we can educate ourselves on how the market is translated into numbers. For example, right before the market crash, the median sales price sat around $257,000, and the average interest rate sat just over 6% on a 30-year note. A simple principle and interest payment would then be approximately $1600 a month. (This would not include your taxes and insurance that would be required.) Today, the median sales price comes in around $347,000, and interest rates are remaining steady on that same 30-year plan in the higher 2%s. Your new principal and interest payment are much lower at $1400 a month. (Again, this is not including your taxes and insurance.) Clear as mud, right?
For some people, the thought of purchasing a home is completely intimidating. When you are purchasing a home, you get the unique opportunity to build a team of resources to assist in the transaction. Not only will you want to find a real estate agent that understands your needs in a new home, but you will want to work with a loan officer that you TRUST. Sure, you want to be competitive with your rates that you are being quoted, but you want to put a lot of weight into the level of customer service that you are being provided from the beginning. Are they answering your questions? Do you understand what is being asked of you? Are they explaining what products and programs are available to you? Do you understand what you qualify for? If you cannot answer positively to these questions, then you need to find a loan officer who can. There are so many details that have to be accounted for throughout the process that one hiccup can throw a transaction. This is why it is so crucial that you pick the right team. Your real estate agent and your loan officer should be working hand in hand to help you get across the finish line.
So many people overcomplicate the process to a degree that makes it seem as if the real estate market is impossible. It's not. It is more about educating yourself about the moving pieces that go into a transaction.
Before you commit, talk to the experts that are working in the industry daily. It is always helpful to have friends and family work as advisors on your behalf, but at the end of the day, the experts are going to be able to provide you more up-to-date information that will help you make your decision. Keep in mind, this is a government-regulated industry where the guidelines can change at a moment's notice. What worked 5 years ago might not even be applicable today. Assembling a team of the right experts and advisors will help make your transaction run so much smoother.