By Michelle Flaherty
Has the incentive for first-time home buyers to break into the market just gone away?
My non-scientific market research has shown me that it has not. My buyer clients are still excited about the house hunting process, low interest rates, and attractive offerings at low prices – and I’m hearing the same from my peers.
In fact, the drop in interest rates over the past two weeks has created a long-term incentive even more attractive than the first-time home buyer tax credit – and *bonus* – it’s not costing taxpayers a thing.
How does this work? Consider the first-time home buyer using an FHA loan to purchase a $200,000 property. For the first five months of 2010, when buyers were snatching up tax credits like hotcakes, the typical FHA interest rate was 5.25 percent. Over the life of their loan, a buyer who locked in at 5.25 percent would pay a total of $412,621.13 in mortgage payments (including principle, interest, and PMI – not taxes or insurance). Now, with the 4.5 percent FHA rate, that same buyer would pay a total of $380,994.95.
The post-tax credit buyer will save $31,626.18 with the better rate, or $23,626.18 better than they would have done by going under contract in April, closing by the newly-extended Sept. 30 deadline, and collecting the $8,000 tax credit. The caveat, of course, is that their monthly savings only totals $87.85, so they would have to remain in their home for 7.6 years to collect $8,000 worth of savings. But after that, they’re doing better every month!
Michelle Flaherty is an associate broker with Prudential Northeast Properties, serving Greater Portland, Maine. Visit her Web site at www.michelleflaherty.com.
By Brian Copeland
In 1982, I faintly remember my mom going to fight at Kmart for the newest batch of Cabbage Patch dolls. It was a big deal. They were the hottest toy. All the little girls (and some boys) wanted one. It was only a few weeks to Christmas. It was a recipe for opportunity or disaster. She could get in the fight, get the doll and have a happy Christmas for her niece or wait until after Christmas, get a new batch, miss the rush but miss the holiday.
Showing houses to buyers over the past few weeks here in Nashville, I kinda get an idea of how mom felt back in 1982. It seems that every house we walk in priced below a certain price is either (1) in multiple offers, (2) a short sale that can’t make the contract deadline or (3) just contracted.
So, where does that leave us, the practitioners, and our buyers today? If they wait for a better inventory, they miss the tax credit. If they go to contract now, they may be making rushed decisions. As great buyer’s agents, it’s our job to guide them to the best decisions possible. Here are a few tips I’ve been working out with my current buyers.
- Pre-counseling is mandatory. In the counseling session, it’s imperative to discuss short sales and foreclosures in depth, giving them every scenario possible. Explain to them the “season” of searching they are in and what to expect between now and April 30. Continue reading »
By Michelle Flaherty
Does anyone else miss working with people who want to buy AND sell?
In a market marked by bank sales, short sales, and first-time home buyers, it’s easy to lose sight of what lies beyond this year’s surplus of single-sided clients.
The year 2009 was without a doubt the year of the first-time home buyer. Already, an estimated 400,000 fence-sitters have been drawn into the market by low rates, the $8,000 tax credit, and lots of affordable options. We’re still in the throes of this massive movement; but I’ve been wondering lately: When the able first-timers of 2009 have settled into their nests, what will be the next big thing?
My prediction is that 2010 will be the year of the move-up seller. I truly think that those first-time home buyers of 2005-2007, who may not have any market-based home equity, will still make moves in 2010. Why? Two and a half big reasons: Continue reading »
Submit you video to the challenge: The 2009 REALTOR Party Video Contest challenges REALTORs to make a short, personal video explaining how the Home Buyer Tax Credit has helped their clients buy their first home.
The contest runs until Sept. 30.
The winning entry will receive a $500 American Express gift card and be shown at the Annual Convention in San Diego in November.
Two runners-up will receive Flip UltraHD Camcorders.