Four Things to Expect When Buying or Selling This Season
Every year in real estate is a little different as new real estate cycles, such as changing interest rates or inventory levels, and new legislation take hold. This year, sellers should be aware of fluctuating mortgage rates and home prices while buyers should be cognizant of increasing exhaustive paperwork and the resurgence of adjustable-rate mortgages.
Keep mortgage rates in mind: According to real estate brokerage Redfin, many sellers have been waiting until spring is in full bloom to have listing photos taken of their home and putting it on the market. However, because buyers are becoming increasingly concerned with rising rates, though they still remain historically low, many buyers are ready to buy now.
Be realistic about pricing: Though sellers still have a slight advantage, there is less of an inventory crunch than in recent months and last summer, which gives buyers more negotiating power. According to Yahoo! Finance, more competition, higher interest rates, and less investor demand are producing modest home price gains and giving some power back to buyers. Yahoo! advises that the best way to sell your home quickly is to price it right from the beginning. Consult a Realtor and analyze comps to help gauge the best price for your home.
Be prepared for paperwork: If you haven’t applied for a mortgage in a few years, you may be surprised at the growing pile of required paperwork. HSH has labeled 2014 “the year of documentation” with regard to buying a home. The qualified mortgage (QM) legislation, implemented in January, requires lenders to diligently collect and extensively analyze your documents to ensure that you can qualify and pay for your mortgage more than ever before.
ARMs are on the rise: Adjustable-rate mortgages, classified as having fixed-rated periods of five or seven years until the rate resets annually, have been on the rise since last year. These types of mortgages are appealing for borrowers who need larger mortgages set above Fannie Mae and Freddie Mac’s limits. Freddie Mac’s Vice President and Chief Economist Frank Nothaft says that while only 10 percent of home purchases in 2013 had an adjustable rate, ARMs will gain back favor with borrowers this year. However, these loans aren’t for everyone. Buyers should do careful calculations to ensure they would be able to afford the possible maximum payment if rates rise after the fixed period.
Redfin recommends that both sellers and buyers remain calm this season, especially in Atlanta where the market is “feeling frantic.”
“I’m advising my clients to take a step back before making an aggressive offer on any home that hits the market as it’s easy to get caught up in bidding wars,” said Redfin agent Danielle Coats, Atlanta. “Inventory will eventually beget even more inventory, as many people who have one to sell are waiting for something to buy first.”