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“It’s a sellers market!” What does that actually mean?

If you are looking to buy a home this spring, there is a very good chance you will be fighting an uphill battle.  That’s because we are in a “seller’s market” where homeowners looking to sell their property typically have the upper hand in negotiations. But what does it actually mean and how can you prepare for it?  Here’s a practical definition and a few key points to keep you sane while you search for your dream home.

What is a Seller’s Market?

By definition, a seller’s market is one where the number of homes sold during a period of time is equal or greater than 55% of the number of homes listed during that same time. Said another way, for every 3 homes sold in a given period of time, there are 5 new listings added. If you feel like you need to go back to your high-school statistics class to get a grasp on that, we have your covered. Here is a simple example that should put it all in perspective.

Let’s take a trip to Newtown, USA. This particular town is booming because there are great jobs close by, lots of shopping, restaurants and social life. Plus, there are great parks, schools, hospitals and activities for families. Not that many people want to move away from Newtown, USA these days. As a matter of fact, there were only 10 homes in Newtown, USA listed for sale in March of 2017.

After being featured in a few home and community magazines, word has gotten out about how great Newtown, USA is for all types of people and families.  This has caused a large number of would-be homebuyers to consider settling down in Newtown, USA.  As a matter of fact, 8 homes in Newtown, USA were sold in March of 2017!

In this example, 8 homes were sold when only 10 homes were listed during March 2017 in Newtown, USA.  This makes the “sales-to-listing” ratio 80% (well above the 55% needed to establish a “seller’s market”).

(Note: Newtown, USA is a fictional town as far as we know.)

Best Practices in a Seller’s Market

As a would-be homebuyer, you can certainly be at a disadvantage in a seller’s market. A bit of planning and determination can help you through any short-term frustration.

Know your numbers first – While you are not on an episode of Shark Tank, you do need to know what you can afford and stick to it. Getting the best deal on a mortgage loan and working with an experienced mortgage professional will help you put in all in perspective. Using MortgageCS for mortgage shopping means you can easily compare loan terms and get your questions answered before committing to a single lender.

Go for the gold when you find the right property – When demand for property is outpacing the supply, there is no time for low-ball offers. Starting out with your first and best offer can win you the opportunity to purchase the home.  Remember that during the home buying process, you’ll have the opportunity to review a home inspection and will have certain “outs” if there are any issues.

Coincidentally, when mortgage loan originators offer you rates and loan programs at MortgageCS, they too will provide their best offer first. This saves you the hassle of any mortgage negotiations and drastically speeds up the mortgage shopping process.

Be ready to act quickly – By the time an open house is over, multiple offers may have been submitted by other real estate agents. Getting “your team” on the same page going into a weekend of open houses or showings ensures you can act when needed.

Stay focused on your end goal – Chances are that you will experience some disappointment during the home shopping process.  Remember that you will eventually find the property that best fits your needs and keep your head up as it’s the only way to see where you are going!

In a seller’s market, an experienced Realtor can truly help. Realtors who offer MortgageCS are up on the latest technology and ensure they offer the most advanced tools to their buyers. Ask for access to MortgageCS – or contact us and we’ll direct you to a local Realtor who can help.

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About MortgageCS: MortgageCS enables Financial Advisors, Realtors and their clients to compare mortgage offers from top national lenders for free, monitor market rates and shop with confidence – all without sharing personal contact information. Learn more.

All mortgage companies offer the same interest rate…RIGHT?

TRUE or FALSE: There is “one rate” that all mortgage companies offer on any given day. 

Today I met with an owner of an insurance agency. After seeing that interest rates varied by as much as 0.375% between lenders for the same loan, he said: “I thought there was one rate for mortgages on any given day?”.  He admitted that he knew fees could be different, but had no idea that the actual interest rate could vary as well.

Surprisingly, he’s not alone.

While interacting with financial advisors, insurance agents and even real estate agents, we have learned that there is a great opportunity to provide education in this space. For one reason or another, professionals outside of the mortgage industry tend to have surprisingly little knowledge of the mortgage market & process. This may make sense as they don’t “do” mortgages, nor do they receive compensation on them, but it is hard to argue that mortgages are not relevant in the world of financial planning….or real estate for that matter!

The truth is that rates WILL vary between mortgage lenders (as will fees, the personality of the loan originator, the speed at which they can close your loan and the technology in place).  What remains consistent in all mortgage situations is this:

Your choice in a mortgage lender will have a lasting impact on your finances.  

The few weeks it takes to complete a mortgage loan will result in a new debt payment – one which is determined based largely on the interest rate you select (in addition to loan term, loan amount and other factors).  When all else is equal – a higher interest rate means a higher payment for the same mortgage amount. So consider the long-term impact of a loan’s rate – not just a perceived “ease” of a transaction in the short term.

If you are looking for some helpful hints to keep you sane as you wrangle the mortgage shopping process, here are two suggestions:

Don’t fall victim to technology

Ask yourself: Would you complete a paper application if it meant saving $50 to $100 every month for as long as you owned your home? If so, then don’t let an “app” guide you astray. Despite what certain companies want you to think, the mortgage process isn’t really that hard (it’s more of an inconvenience). Regardless of how you obtain your loan, you’ll be left with a monthly mortgage payment for 120, 240 or 360 months. The mortgage process, itself, is a short-term inconvenience at most.

Protect your personal contact information

If you have ever entered your phone number on a mortgage shopping site before, you likely received multiple phone calls every hour for days. Chances are you will NOT do that again. There are plenty of ways to learn about mortgages in a safe way. MortgageCS allows you inquire about specific loan programs and even interact with loan officers directly – without giving out this private information.  As a result, you remain in control of the contact process and once you find the best fit – you can then decide to share these details.

In closing, and just in case it hasn’t been obvious yet, mortgage rates CAN & DO vary significantly between mortgage lenders for several reasons.  To be safe, take your time, and ensure you end up with a great deal by focusing on the end goal. Using MortgageCS keeps it straightforward and simple, so get started today at MortgageCS.com.

Increasing confidence when mortgage shopping

Since the early stages of building MortgageCS, we have been interacting with financial advisors to validate the platform features. Throughout this process, the platform’s ability to harness real-time mortgage data has earned and maintained a top value position. In fact, this component addresses one of the “aha” moments we learned of back in early 2015. Here is how we learned of the mortgage confidence problem – and what we did to solve it.

Uncovering the Confidence Problem

In early 2015, we conducted an anonymous survey focused on understanding buying behaviors surrounding mortgages.  We asked respondents to rank the factors they consider important in a mortgage offer.  Perhaps not surprisingly, interest rate took the top spot, followed by bank or lender fees in the second position. The next three positions were inconsistent but included proximity to institution, reputation of institution and personal relationships.

We then asked respondents to rate their level of confidence in obtaining the best loan terms for their given situation. The scale included a 5-point range from Very Confident to Not Confident At All.  Shockingly, only 9% of respondents revealed they were Very Confident. When combined with Confident, the number grew to just 21%.

According to this data, only 1 in 5 recent mortgage shoppers were Confident they obtained the best loan terms – despite it being the top priority when ranked against other factors.

How could this be?  One possible explanation can be found by looking at the existing mortgage landscape.  A fragmented market, with lots of advertising dollars and a perception of a complicated transaction could take some blame. Perhaps consumers are settling early and avoiding “pain” (a human tendency) – rather than continuing on what can be perceived as a long and complicated journey. Or, perhaps there is just no way for consumers to know, given the current tools available to the market.

Solving the Confidence Problem

We looked at what makes people feel confident when shopping. When it comes to many large buying decisions, using prices that other people paid can be a good judge of deal quality.  Anyone that has purchased a car recently, likely reviewed what others have been paying. Based on that, they either approach the car buying process with confidence or, if after the fact, may realize they overpaid. Regardless, the fact remains that access to information can create confidence in approaching a buying situation.

So, we applied this to mortgage shopping when building the MortgageCS platform.  Market Insights will collect proprietary data, harnessed within the platform, to inform consumers of “what others paid” for a mortgage that matches the key terms of their loan. This is part of our magic sauce and routinely generates a “Whoa!” reaction from financial advisors during a demo presentation.

So, will the Market Insights component solve the problem of “lack of confidence in mortgage offers”?  Based on initial reactions from professionals who have witnessed Market Insights in action, it certainly will.

3 ways to keep your payment the same when rates are on the rise

When it comes to mortgages and the home buying process, interest rates are almost always front and center. This is not a surprising thing, as nothing else impacts the housing market quite like a quick rise (or drop) in mortgage interest rates.  Additionally, mortgage interest rates are one of the most commonly compared terms when consumers shop lenders and loan officers.

For most first time buyers, sticking to a budget is essential. So what is one to do when rates suddenly increase?  Well, there are a few options – some a bit easier to consider than the others.

Look for smaller homes in the same area

If your heart is set on purchasing a home in a particular area, interest rates have recently increased AND you are on a fixed budget, there is little you can do but search for a lower priced home. If you were looking for a townhouse, this may mean you need to reduce the bedroom and bathroom count or perhaps even switch to consider condominium units. You may no longer be able to afford a home with the upgrades you hoped to include or perhaps you can no longer afford the unit with a basement or garage.  In either case, some level of sacrifice will need to be made as the macro-environment of interest rates increases.

Look for homes in a less expensive area

Maybe your heart isn’t set on buying a home in a particular area – but rather the home’s amenities are front and center. If this sounds like you, then it may be easy to consider a home in a different school district, township or even over state lines (if applicable). Keep in mind that the school district can be a very important factor in reselling a property – so a bargain price today may be more difficult to sell in the future (and may appreciate at a slower rate overall).

Delay buying until next year

No real estate professional wants to see you delay the purchase of a home – and perhaps you don’t want to either. However, if you are set on a certain property type and location for your new home, this may be the most viable option provided that you can save money at a rate that will outpace the appreciation on the home and any subsequent increases in interest rates. Note: This may be a HUGE amount and ultimately be unknown until a time in the future. 

Keep in mind there are some significant risks with delaying the purchase of a home. First, the interest rate environment is largely unpredictable and rates could increase further – actually making the home less affordable next year.  Second, home prices could increase which translates to you spending more over the life of your loan, and missing out on a year’s worth of home value appreciation. Third, there is no way to know what the home inventory may look like.  If there are homes you would consider purchasing today, there is no way to guarantee the inventory will be available next year (Just ask anyone that wanted to buy a house in 2016 and waited until 2017 when inventories were down 40%!).