Good Reasons for Buying and Selling
Many buyers and sellers are not aware that it is an opportune time to buy or sell a house. The news media reports that the market is recovering, after many years of broadcasting negative news when it comes to real estate. There are many good reasons to buy or sell a home right now.
The positive news for buyers is, although interest rates are on the rise, they are still historically very low. They have gone up from a low of 3.5% to 4.25%. For example, a loan on a $200,000 house with a 10% down payment at the low interest rate of 3.5% would result in a payment of $808.28, principle and interest, on a 30-year loan. That same house at today’s rate of 4.25% would be $885.49. During my 15 years in real estate, 6% is closer to an average interest rate, at 6%, that house would cost $1,079.19. At today’s rental rates, that same home would cost a renter at least $1,600 a month. It is obvious that it is cheaper in today’s market to own rather than rent. Using today’s interest rate of 4.25%, one would save $714.51 a month by owning. This is in comparison to renting, which translates into a savings of over $8,575 a year and that’s without taking into consideration the tax benefits of owning vs. renting. It is a great time for investors to purchase. The aforementioned example clearly illustrates rental properties are providing investors with the following: healthy positive cash flow, the renter pays off their mortgage for them and the investor gets the tax benefit of depreciation.
It is reported that prices are on the rise, the market is beginning to recover but prices are still very low when you look at them historically. That same $200,000 in our example above sold before the market peaked for $265,000, so it is still below its value in a normal market. The recovery is just beginning. It is a great time to invest in a home while prices and interest rates are still relatively low.
There are very few sort sales and foreclosures on the market now, which means buyers are finding homes to be in a nicer condition and are able to purchase homes directly from an owner rather than having to work with the bank. Homes purchased directly from a seller are typically in better shape. They have been maintained and cared for by the owner and have not sat vacant, which many times leaves a home vulnerable for vandalism. Homes sold directly from owners come with warranties and seller disclosures. Unfortunately, when distressed properties are sold they are lacking disclosures and warranties and are sold as is. Traditional sellers are more likely to do repairs and disclose important information to the buyer about the home they are purchasing. Another big advantage of buying a home that is not distressed is that the buyers negotiate directly with the sellers, as opposed to dealing with the banks, which can be frustrating and time consuming–most short sales take a minimum of three months or more to close. This leaves buyers in limbo during the process, not knowing if the bank would ever approve of the short sale.
It is also a great time to sell your home. Many homeowners do not realize that due to rising prices, they may have equity in their home. Many sellers stood on the sidelines for the last several years because they felt they couldn’t sell their home because they owed more than the market value. That has now changed and they may be able to sell and make a profit. The number of homes available for sale on the Multiple Listing Service is low. Demand for homes is high as we addressed above. Basic economics tells us that when supply is low and demand is high, prices will rise. Due to this scarcity of homes available to buyers, sellers are seeing multiple offers, which drives up the price. Buyers are also accepting homes in as-is condition and paying the difference when the appraisal comes in under the contract price. Buyers are also feeling a sense of urgency to buy since they are aware that the interest rates are on the rise now along with home values.
The Phoenix real estate market is recovering and is a market where buyers and sellers can make a smart investment that will payoff in the short term and the long run. Currently we are experiencing the best environment for investors to earn positive return on their investment. The economy is showing signs that the job market is growing, new homes are being built again and real estate is strong.
It is time to get off the fence and make a move.