Buyer knocks down a $4 million home

What DAY is it? What day is IT? If you answered Hump Day, you’ve apparently been watching too much TV. But in the real estate business, it really we just had a real Hump Day, and here’s why. Every once in a while the stars align, the moon is in it’s seventh house, and the real estate agents begin to tremble as FINALLY all the parts that make a strong market come into focus. For the last few months real estate sales have been growing and holding. Growth against last year has been strong, and most of the really crappy properties have been snatched up by investors with the promise of returning them to the market “fixed up” and ready to sell at a profit. More on that in a week or so. Even the big homes, in the over $1 million range are moving again, and I smiled to see a $4 million dollar home up on St Armand’s circle was recently sold and now they are taking it down in favor of building a new and bigger more modern home. I suppose if you have gabillions of dollars in your various accounts, maybe you don’t want a home with used bathrooms and last year’s tile patterns. I’m too much of a Yankee for that—if it were me, I would have bought a vacant lot. I mean why knock down a $4 million home? The owner answered, “it was all for the deepwater dock and the view…” And yet, with all the good real estate news, mortgage rates had begun to climb and each upward tick in the cost of borrowing money shut a few more buyers out of the market. Quantitative Easing (QE) is not my favorite economic concept because it means the Federal Reserve is buying Government bonds back from the owners using freshly minted money; money which has no value of it’s own which is obviously inflationary. QE is a method of keeping the bond rates low (which keeps the mortgage rates low). It turns out that Wednesday this week really was Hump Day—it was the day the world thought QE was coming to an end—tapering they called it, and tapering would cause mortgage rates to soar because, as we had been told, the market was strong and the economy was getting better. But then…nope. Didn’t happen. Even as the President spoke for an hour or so in the morning, discussing all the wonders of the economy, in the afternoon the Fed announced that the economy was still too weak, unemployment still too large, and inflation was not yet a huge problem. So armed with these concepts, they decided to prolong QE, which had the effect of lowering mortgage rates overnight. We got over the hump. So is it a good time to buy or sell? Yes. For sellers, the August resale home numbers were plus 12% from last year, and September will no doubt be similar. The new construction is selling briskly even where total sales numbers are a function of how many homes can be built. So if you plan to sell, clean up, paint up, fix up and get the house ready for the buyers who are ready and now can still find cheap mortgage money. If you’re a buyer, the time is right. Homes are still affordable. Get yourself pre-approved with a bank or well-known mortgage company. Give a copy of your pre-approval letter to the Realtor you are planning to buy through. When you are in need of a mortgage, you are not a cash buyer, but if you are pre-qualified and pre-approved, you are ALMOST a cash buyer. If you actually have cash, you eliminate having to get financing and the bank’s appraisal and that is of great value to the sellers, who will be on pins and needles from the time they accept your offer until the home inspection is complete. If you have a pre-qualification letter, you demonstrate to the buyers that you can afford the house—even thought it still has to appraise. One note regarding that approval letter: if the mortgage company approved you for a home up to $300,000 and gave you a letter so stating, and you find a house at $275,000 and decide to offer $259,000. Don’t hand over the letter that says you can go to $300K, have the mortgage agent write a new letter that says you are good to $260K. If negotiations take you to $265,000, have the mortgage person write a letter Okaying you up to $265K. The mortgage agent wants to have your mortgage business, so these letters are no problem. Dane Hahn is a real estate professional serving Charlotte and Sarasota counties. You can reach him at 941-681-0312 or by email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com