MORTGAGE INTEREST RATES, HOMEBUYERS, HOME SELLERS
Should Sellers Help Buyers with a Mortgage Buydown?
In August 2023, the average 30-year mortgage interest rate hit its highest level since 2000. At 7.48%, they were nearly triple where they were during the pandemic when they reached a low of 2.65% in January 2021. Meanwhile, median home prices rose for 10 consecutive quarters beginning in fall 2020, only declining for two straight quarters to $416,100, which is still 26.4% higher than the quarter just before the pandemic.
The National Association of REALTORS® reported that existing home sales volume in July 2023 slipped 16.6% from the previous year, even as home prices rose to $406,700 from $399,000 a year ago. While many markets are still robust, others have slowed considerably. How can sellers bring more homebuyers to the table?
As a concession, the seller can offer to pay discount points to the homebuyer’s lender to help the homebuyer get a lower mortgage interest rate. Called a seller-paid mortgage rate buydown, these discount points are typically 1% of the homebuyer’s loan amount and every discount point paid reduces the mortgage interest rate by 0.25 percentage points. If the mortgage amount is $400K, a discount point would be $4,000, and the monthly principal and interest payment at 7.5% would be $2,797. A seller-paid discount point would lower the interest rate to 7.25% and a monthly payment to $2,729. Over the life of the loan, the borrower would save$24,535.
Talk to your Berkshire Hathaway HomeServices network professional about seller-paid mortgage rate buydowns and see if they can benefit your transaction.
HOMEBUYERS, MARKET CONDITIONS, HOME SELLERS
What to Consider When Selling a Home “As Is”
It’s no secret that homebuyers prefer move-in ready homes that have been repaired and updated. The Wall Street Journal reports that fewer homebuyers want fixer-uppers because of high mortgage interest rates and construction loans. Since the seller has disclaimed the home, the cost of repairs and updates are unknown. Some mortgage guarantors like FHA and VA have certain safety and home integrity requirements, which means that if the seller doesn’t make the improvements needed, the homebuyer won’t be approved for the mortgage loan.
Yet, there are times when the seller simply doesn’t have the financial or practical means to make repairs and improvements. So, what can the seller expect from the marketplace?
Selling a home “as is” means selling the home in its current condition to relieve the seller of most of the responsibilities and costs associated with selling a home. As-is sellers still need to meet minimum state and federal disclosures, such as filling out a seller’s disclosure that declares known defects and problems in the home, but this can have a sobering effect on homebuyers. A balanced market, or one in favor of buyers can reduce the selling price of an as-is home as much as 15% to 20% below market value and takes longer to sell, exacerbated by carrying costs such as mortgage payments, HOA fees, utilities, and more.
Lower offers can also be expected from investors who pay cash, as they have purchase and resale formulas that must be met before they’re interested.
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