So, if you are like me, you have a lot of logic built into you.  You see that home prices are rising, and of course, we are still way off the highs that we saw a few years back.  So, why not wait it out?

Excellent Question!  I am so glad you asked, and there are so many factors, this is a long post.  (If you start to get tired, at least skip ahead to 5-C, you do not want to miss what very few if anyone is talking about)

Interest rates are incredibly low.  This can affect you in three ways.

a.    If you are going to buy a home, then you are obviously going to be able to purchase more home with lower rates.

b.    In the same way, rates will affect your pricing as well.  Once rates start going up (and they will), your homes appreciation, will slow, stagnate, or even fall.

c.    And something that you may not consider, the urgency will be gone from buyers.  Sure, there will always be buyers.  But, right now, buyers are worried that they are missing out on a great opportunity to buy when the market is off it's highs and the interest rates are so low.  

2.    Recovery to the highs of just a few years ago will not be seen anytime soon.

a.    Home prices grew well in advance of the affordability index.  In other words, home values appreciated well above where they should have.  Will that happen again?  I am sure it will.  It happened in the late 80's through early nighties.  Then it happened in the mid 2000's.  So, you only have to wait 10-15 years.  (If then, if you read further, you will see why this may never happen again)

b.    Home prices were pushed up because buyer's buying ability continued to increase.  The ability to get a loan at that time was much easier, and many loans were made that should never have been made.  They had stated income loans, and if the person's occupation didn't 'reasonably' make that amount, then they would just do a 'no doc' loan.  The lender was able to charge a higher interest rate, and the buyer was able to get a home that they would not otherwise have been able to.  And, of course, real estate is always going up, so it was a smart...'investment'.

c.    Appraisal guidelines have gotten much stricter.  The reality is that an appraisal is an opinion of value.  And, appraisers are licensed or certified, they train under a mentor and they are required to perform their work ethically.  Unfortunately, appraisers have proven to be corruptible on occasion.  To combat this, the lenders have tightened the guidelines to require appraisers to provide much more documentation.  Additionally, now, the appraisers have an appraisal management company review the appraisal even before the underwriter.  So, even actual appreciation is harder for the appraiser to prove.  And, as we progress in the information age, so many things are put to computer modeling.  Home values are no different.  As this has become more prevalent, the appraiser's discretion has become less so, and there is no reason to expect any reversal of this trend.  So, any rapid rise in prices above the affordability index will be harder than ever to realize.  

3.    Scarcity.

a.    Believe it or not, there are many more buyers than there are houses.  Our total inventory is about 3 month’s supply of inventory.  And, this number is a little skewed because if we had more houses, we would have more sales.  And, with sales occurring so quickly, agents struggle to keep their system updated and a large percentage of homes that are ‘available’ in the MLS systems are actually already under contract.  So, the actual number is LESS than a three month’s supply.  In many areas, homes below the median price point for the area are actually at less than a two month’s supply.

b.    Many homes that are priced right and in good condition are getting multiple offers and selling for above list price.  (not kidding)

c.    Buyers are less selective, because they have to be less selective.  18 months ago, your home had to look like it belonged in Better Homes and Gardens to get market value.  And, if not, your home would just sit on the market for months, or even years.  Now, so long as the home is in reasonably good condition, buyers are willing to pay full market price.  Remember, there is a sense of urgency combined with the scarcity.

d.    Homes, especially below $150,000.00 are being purchased at an alarming pace by investors.  And, believe it or not, these investors are paying market value for homes.  Why?  They are basing their decisions on market rent and the low price of money.  Foreclosures are first offered to owner occupants and non-profits.  And, owner occupants are given preference for these homes.  So, these investors now focus their efforts on sales from regular homeowners, just like you.

4.    You are buying in the same market that you are selling in.  Assuming of course, that you are actually buying another property.  And, assuming of course that you have a good agent, like the wonderful and eloquent writer of this fine informational blog.  Shameless promotion, which of course is the kind of promotion you need when selling your home.  ;)

a.    This has been a valid point for the entire time of the down market.  Especially if you were moving up in homes.  However, many people were so upside down, that this was not even a possibility.

b.    The only way this doesn't prove out is if you are downsizing.  I would still point out that you would be purchasing a home at what is most likely a much lower interest rate and that could greatly offset any losses that you would take on.

5.    Your competition is coming.

a.    As the message gets out more and more about the market, there will be more and more listings from other owners.  That will give the buyers more selection and they can be pickier.

b.    There is still a lot of foreclosure inventory that isn't on the market.  Now, much of this has been sold to foreign investors and hedge funds, and it is being used as rental property.  So, this may not come on the market anytime soon.  And, banks, most likely, aren't going to turn loose of a bunch of property at the same time crashing the market again.  But, they will start to offer more and more as time goes along.

c.    Builders are coming back....and at prices that will compete or even undercut you.  So, the buyer will have a choice between your lovely home or a brand new home with the latest finishes and upgrades for about the same price, if not even lower.

                                         i.    Before a brick is bought, before a foundation is poured, historically, a builder has to first purchase and develop the land.  However, with the recent real estate implosion, many builders went out of business.  That left large tracts of land and subdivisions that had already been developed there to be snatched up.  And, snatched up they were… and for pennies on the dollar.  In most cases, these already developed lots were purchased for less than ten cents on the dollar.  Do you think that doesn’t factor into the bottom line?

                                        ii.    The builders that have been sitting on the sidelines have been operating on a shoestring budget with a much smaller infrastructure.  And, much of the land in our area has been acquired by large national builders that can produce a home at an even lower cost per square foot due to standard blueprints and materials sheets.  They are able to cut the time of production and the waste of materials.  They, bottom line are a leaner, meaner hungry competitor that is just salivating at the current market and lack of inventory.

                                                          iii.      Despite our improvement in the housing market, the job market has not improved.  Therefore, these builders will be able to hire skilled craftsman at a much reduced price.  Many of these people are still looking for work or vastly under employed, so they will come cheaper.

I know that this is a long, long post.  But, there are so many factors that indicate that the best time in the next three years or so to sell your home, that I wanted to make sure I pointed them all out.  And, explain them to a point that you can see this isn’t just a ploy to get listings, but a heartfelt urging of you not to forego a great opportunity to sell your home and accomplish your goals.

And, as with everything on this blog, this comes from the perspective of a Georgia Realtor and Inactive Certified Residential Appraiser with 15 years of experience in the Metro Atlanta area, and more specifically, the Gwinnett, Hall, Forsyth and Jackson counties.  If you are outside of these areas, all of these factors may not apply to you.  And, if you are in any of these counties and would like me to come show you the market specific to your area, and your neighborhood, contact me.  Every market is location specific.  Every price point offers different statistical variables and is affected by different market influences.

You can contact me via phone at 678-318-4977, via email at [email protected], or via the contact form on this website.

Remember this is a an overview for the entire United States.  Call me directly for how your market is doing.

This morning I read a blog post about how the seller should not list their property for more than it will appraise for, regardless of what you can get it under contract for.  I completely disagree.  I come from a little different perspective, as I was a certified residential appraiser for 15 years.  And, I know this will upset some of my peers in the appraisal business, and even some agents, but frankly, let the appraiser worry about the appraisal.

This is a hard blog to write, because I don't want it to come across as encouraging a seller to overprice their home.  That is never a good idea.  It will cause the home to sit on the market for months and eventually sell for less than if the home was priced right in the beginning.  But, the reality is that you don't get to pick the appraiser and two different appraisers can see the same house very differently from a value perspective.

Obviously, as the seller, you need to know if there could be some issues with the appraisal.  Your agent should be able to go over what the homes in the neighborhood are selling for and how your home compares with those.

With that said, it is always better, from the position of the seller, for the contract to apply upward pressure to the appraiser.  Few appraisers like to come in low.  And the first piece of information the appraiser gets about what your home is worth is the contract that shows what at least one person is willing to pay for your home.  And, while they may not be able to make the value you wrote the contract for, the reality is that if you try to worry about the appraisal before hand, you can leave thousands of dollars on the table.

Right now, the market inventory is low and interest rates are at historically low levels.  Buyers see that home values are still below the peak of the market.  And on top of all that, rental rates continue to go up and you can own the same house for far less than you can rent it.  All of this combines to allow sellers to get a premium for their homes right now, and often to get homes under contract for above what it will appraise for.

List the property for as much as you think it will go under contract for.  So, no, I am not saying list it over what the market will pay for it.    But, list it based on how it compares to other properties on the market and how it compares with the homes that have sold in the subdivision.

If the appraisal comes in low, the seller and buyer have options.  From a seller's perspective, they don't have to sell the property for less, but will probably be motivated to do so.  From a buyer's perspective, they have already invested an inspection and appraisal fee into the property.  This would be $700 on average.  Depending on their financial ability, and how much they desire the home, they may bring additional money to the table.  Or, concessions can be reduced such as closing costs.  The lender can adjust the rate upward a little to pay for closing costs.  This allows the seller to sell at appraised value and still get a similar net price.

To sum up, let the appraisers worry about the appraisal.  The seller and listing agents job is to represent the seller.  Most seller's priority is to put the most money possible in their pocket, so list it for what you can put it under contract for.    

First, congrats on shopping the rate.  That is a great first move.  Too many people overlook this altogether.  Loan officers are typically paid a commission by the lender to sell you a mortgage.  The higher the rate, the higher the yield split, OR commission for the loan officer. 

This is mainly focused at borrowers looking to buy a home.  However, anyone looking to get a mortgage of any kind would benefit to read through.

#1) Know that if you are purchasing a property, there is some risk if the mortgage company does not get the job done.  Real estate contracts have a closing date on them.  There is typically a seven day unilateral extension option on standard GAR contracts.  However, after that, your earnest money will be in jeopardy.  So, if your lender cannot close on time, you could lose the earnest money and the right to buy the house.

#2) Know that if you are shopping today and can't lock today, that you will need to shop again when you have the property to get the lowest rate.  Why? 

Well, first, there are some loan officers that will lie about what they can do today, so that they undercut everyone else you are talking to.  Suddenly, those other names go in the trash, and when you go to lock in the rate, they have no competition at that point.

Second,  there are times the lender is trying to 'buy' the market.  In other words, one lender may be less right now, but in two weeks, another one might be.  Lenders, like every other business have a maximum capacity.  When they get to that point, they may raise their rates a little to increase the margins to pay overtime, temp workers, or just to make it worth it to put additional stress on their system.  If a lender is slow, they may lower their rates just a tick to keep the loans coming in.

#3) There are direct lenders and mortgage broker.  A direct lender is a company that will be handling the entire process.  A mortgage broker has the ability to shop many different mortgage companies.  So, which is better?  A mortgage broker can often find the best rates.  (they may also use that to just put extra money in their own pocket)  However, mortgage brokers will often go with whatever company is giving them more profit for the lowest rate.  If it is a difficult company to work with and your loan may not get done in time, many of them don't factor that in.  Smaller direct lenders like Guarantee Mortgage and Brand Bank tend to have good rates and the ability to close on time, 99.9% of the time.  (Especially if you have a good loan officer.)  Larger banks are often the worst of both worlds.  I have one specific large lender that I would never advise anyone to use.  They nearly cost one of my buyers their earnest money TWICE.  I won't say their name, let's just call them Stank of Amerika.   If you are considering using a mortgage company that rhymes with this...reconsider.

#4) When you get locked, ask for a copy of the lock sheet.  Otherwise, the lender is playing roulette with your money.  They are hoping rates go down, so they can make more money.  Most, however, will not eat the difference if rates go up.  They will call and make up an excuse as to why your rate is different.  And, you may be two weeks into the process and need to close to save your earnest money and get the house you want.

#5) There are new regulations that will protect you somewhat compared to five years ago.  These keep loan officers from making a mint off of you.  However, that is very limited and there is a lot of wiggle room.

#6) And, this is very, very important.  If you intend to be in the house long term, especially if it is the entire term of the mortgage, shop by the APR.  The APR is the actual cost of the loan to you.  Lenders can charge points and fees, and all sorts of different things as profit centers.  A 3.5 interest rate with no points and low fees is most likely a better deal than a 3.375 interest rate with a 1 point origination fee.  The APR factors in ALL costs for the length of the loan.  This can make it MUCH easier to cut through all the fees and charges on the quotes.  

#6a) If you are planning to move in less than ten years, and the lower APR has higher fees up front, then you have more work to do.  If the lower APR has higher up front fees, then take the additional fees and divide it by the amount of money you will save per month.  So, if one payment is $25.00 per month less, but it costs you $2500.00 more to get the loan.  You will break even in 100 months.  So, if you plan on moving in less than 8 years, it would be smarter to go with the one that has the fewer upfront costs.