Real estate enthusiasts have been seeing the same trends for the last three or so years: there’s no inventory, prices are skyrocketing, interest rates have spiked, rents are booming, housing is unaffordable, the pace of home building lags demand, real estate agents are struggling, etc. But out of the maelstrom come two saviors: individuals who brave the cold, brutal darkness of the residential market, eschew the negative chatter and create beauty out of pain. These two groups of intrepid adventurers go by the following names: Buyers are those eternal optimists, those relentless seekers who won’t give up just because they have viewed a dozen homes, made four offers, and still not secured permanent shelter.
Swords drawn metaphorically for battle, they slash the fear of high interest rates, stab at every appropriate listing in their price range, procure more resources, and finally plant their trusty blade in the property that was meant to be as they set down roots and begin the American Dream. Sellers are generally a different breed, compelled to act by life circumstances – an emptying or filling nest, a new opportunity out of the region, or some other exigency. They may have deferred the inevitable for as long as they could hold out, awaiting a dip in interest rates or some other market disruption that would reduce the psychic pain of trading in a 2.
5% mortgage. Prepared finally to cash in their previously unthinkable profits, they get on with life and pocket the difference. Despite all the turbulence, you might be surprised to discover that there are many thousands of these intrepid warriors, in fact, approximately 23 thousand of them so far this year in the Charleston region alone, equally distributed between the first group (buyers) and the second (sellers).
Perhaps you would like to join this crowd, either on one side or the other or on both if you’re the selling-then-buying type. Real estate agents have some words of wisdom for you that are designed both for today’s specific circumstances and for real estate transactions generally. Aaron Holley is a real estate agent at eXp Realty who bills himself as “the agent who makes it simple.
” He points out that the fundamental variable in real estate is price because that is the easiest thing to negotiate. “The location can’t be changed; the condition is what it is,” he said. “So many people try to break it into so many things.
Keep it simple.” He recommends that buyers and sellers alike focus on controlling what they can and letting everything else go. “For example, you can control your offer, but you can’t control how the other side reacts,” he said.
Stick to the facts on the ground and avoid letting emotions interfere. After all, it may be the place where you hope to raise your family or the vessel in which you already did, but ultimately, the transaction is just business. Katarina West has witnessed the impact today’s odd market has had on some buyers and sellers, as well as the poor judgments it has inspired.
An agent for Realty One Group, Coastal, she warns against attempting to time the decline in interest rates. The nation has been awaiting a quarter-point reduction by the Federal Reserve all year, during which home prices in the Charleston market have climbed another 6%. Moreover, likely, the next rate cut is already baked into mortgage rates, meaning the Fed may be irrelevant when it comes to mortgages in the short term.
She recommends adhering to the real estate dictum “time in the market over timing the market. To her point, consider a median-priced house in the Charleston market of $400,000. Buying that house now at 6.
5% with a 20% downpayment requires a monthly payment of $2,447. Waiting a year while the sales price leaps another $20,000 to benefit from a half-point decline in the mortgage rate costs another $20,000 in the sales price and increases the downpayment by $4,000—all that to reduce the monthly payment by eight bucks. And you’ve lost a year of equity.
If interest rates decline dramatically, today’s buyers can refinance. West points out that some lenders offer to waive their refinancing fees for those who borrow now. For sellers, West says, a short memory is essential.
“Price for today’s market, not yesterday’s.” In some communities where home building is more robust – think areas of Summerville and Goose Creek, for example – the market may have gone catawampus, with downward price pressures on existing homes that lack some of the bells and whistles of new construction. “You may have heard that your neighbor sold for a top dollar two years ago, but conditions have changed.
If you want to move fast, don’t try to test the market with a high price,” she said. Dropping a price because of a lack of inventory is a red flag to buyers and suggests they should lower their offer. If you’re a seller, make sure you know where you’re going, says Kristen Krause, a Coldwell Banker agent who works in both the residential and commercial space.
Because inventory remains tight, sellers are increasingly working out leaseback agreements that allow them to stay in the house as tenants for a limited time after the sale. Others are opting to rent for a year while they consider their options. For buyers, Krause recommends looking beyond the home price and mortgage rate to the ancillary fees that might bump costs beyond the comfort zone.
These include proration for taxes, insurance, fees, and community assessments. For example, Mt. Pleasant’s I’On community imposes a transfer assessment on both buyer and seller at closing.
“You really need to have a pre-settlement statement, which you can request from your attorney before you even ratify the contract,” she said. The statement outlines the bottom line for both sides of the transaction so they can be clear about what they will actually pay or receive. Those numbers can particularly shock sellers if they expect the sale to yield close to the sales price in profit.
Aaron Holley agrees with the pre-settlement statement and takes it a step further. “Know your numbers, your hard stops,” he said. “If, as a buyer, you won’t spend over $400,000, don’t offer $420,000 and then regret it.
” Likewise, for sellers, he says, know what you just won’t sell the house for. That said, Holley cautions individuals on both sides of the equation to understand that it doesn’t matter what anyone thinks the house is worth, just what it will sell for. “The appraisal is not the value of the house; it’s an opinion.
You’ve got four opinions of value – the appraisal, the seller, the buyer, and their representatives. But you only have one value – the number agreed to by the buyer and seller. If you look for simplicity, it’s there, but you have to look.
” On top of that, he says, keep it simple by filtering out the irrelevancies. For the seller, it was the sacred space in which your family lived. But now it’s just a house for sale.
And buyers need to forget about what the seller paid for the house. They may be making a killing; just the same, they’re not cutting you a break. “The only thing that matters is what you’re willing to pay to buy it,” he said.
West sees a market in transition, from sellers in command to a more even playing field. As a result, home sales are more of a negotiation these days than an auction, as it had been in recent years. Because houses are sitting on the market for an average of 38 days, buyers can make some demands.
West represented a first-time home buyer who was light on cash but backed by a low-downpayment loan. He offered full price but asked the seller to cover the $11,000 in closing costs that allowed him to close the deal, adding $70 to his monthly payment. It remained within his price range, so everyone was satisfied.
Aaron Holley says that the arrangement worked out for the buyer and seller, which is how homeowners and homebuyers should approach the process. “Real estate is not a sporting event with a winner and loser,” he said. “In this business, you can have two winners.
The lister wants to sell it; the buyer who makes an offer wants to buy, so you have two winners.” Indeed, Holley and Krause recently worked on opposite sides of a deal and recommended each other for this story out of mutual respect. Despite all the commotion about interest rates and home prices, Kristen Krause sees a good market to purchase a home.
With increasing values in Charleston, she recommends prospective buyers get a ride on the real estate rocket while they can. “I just don’t see values dropping anytime,” she said..
