How 2-1 Buydowns Can Help You Win

 How buyers and sellers can both benefit from using a 2-1 buydown.

Recently, interest rates have increased significantly. As a result, demand has fallen, and it’s becoming harder to sell your home. Fortunately, there’s a unique financing strategy that home sellers can use to get top dollar for their properties, and it’s called “2-1 buydown.”

Here’s how it works: Let’s say the interest rate today is 7%. By paying upfront for a 2-1 buydown, you can lower the interest rate for the first year of the loan by 2%. In the second year of the loan, the interest rate will be 1% lower, down to 6%. After that, the rate increases to the full 7%. 

This is a fantastic way to lower your buyer’s monthly payment at the start of their loan and help them ease into their mortgage. One of the reasons this method is becoming so popular is that it commonly leads to win-win situations. Buyers get a much lower interest rate upfront, and sellers don’t have to lower the prices of their homes. 

"By the time their buydown is over, the buyer can refinance."

Since interest rates are so much higher and demand has fallen, buyers have a lot more negotiating power. They see that many sellers are reducing the prices of their homes, and they may ask you to lower yours. However, a 2% decrease in your asking price will have a minimal impact on the buyer’s monthly payment. On the other hand, a 2% rate decrease for the first year will greatly reduce their monthly cost. 

Another great perk of this strategy is that it leaves room for interest rates to come back down. Rates have increased recently, but it is unlikely that they will stay this high for long. By the time your buyer’s 2-1 buydown is over, rates may have fallen, and they can refinance to permanently lower their monthly payment. 

If you have questions about how this strategy can help you secure a fantastic deal in this market, please call or email me. I am always willing to help!

Should You Wait for Rates To Drop?

 

Don’t let fear take over—waiting for a better rate may hurt even more.

Today I want to share some perspective regarding how insanely interest rates have jumped lately. I was recently talking with a great client and friend of mine, Bruce Barker, who put it so perfectly. He said, “Historically, the average interest rate has been 7.6%.” 

To have an average, you need something to be lower, and you need something to be higher. We have had extremely low interest rates over the last few years, and now they’ve risen to 6.5%. That's been a significant jump, but they’re still below the historical average. It's possible that interest rates will go above the average of 7.6%. If you’re thinking about holding off until interest rates come down, I want to pause and reconsider. I hear many people say those things, but based on what I'm seeing in our economic outlook, I don’t believe rates will drop any time soon.

"Get into something now and build your equity."

If you can afford the mortgage payment on a property, lock it in. If the interest rate does come down at some point, you can always refinance. You shouldn’t gamble with your future and the house that you want for your family because you’re hoping interest rates come down. Real estate doubles every 10 years, so get into something now and take advantage of being able to build equity over time.

If you have any questions, don't hesitate to reach out to me by phone or email. I’m here to serve you.

A Comprehensive Update on the Housing Market

Everything you should know about our current housing market.

Have all the changes in the real estate market been too overwhelming to keep up with? There’s a lot happening, so I can’t blame you! That’s why I’m here today, to make sense of it all for you. It can help you stay updated on our Pierce County market so you can make informed real estate decisions. 

You can hear the full update by watching the video above, or you can skip to individual topics by using these timestamps: 

0:00 — Introduction 

0:30 — Median sales price 

1:20 — Median percent of list price 

1:54 — Days on market 

2:04 — Pending sales and number of homes sold 

4:00 — Determining what kind of market we’re in 

4:40 — Inventory 

5:35 — Interest rates and the Federal Reserve rates 

6:00 — How to price a home and handle this market 

6:45 — Wrapping up 

The bottom line is that there are advantages in this market for both buyers and sellers. If you have any questions, I would love to be your real estate resource. Call or email me and my team anytime!

Your May 2022 Pierce County Market Update

 Here’s what’s happening in our market and how it affects you.

There’s a lot happening in the market, and it’s starting to get a little weird. That’s why I wanted to share some hard data with you today to show you what’s taking place. Let’s dive right into these numbers and what they mean for you as a buyer or a seller.

You can watch the full video above or skip to each section using the timestamps provided:

0:00 — Introducing today’s topic

0:32 — Home prices are at an all-time high

1:13 — The five-year graph for the sales-to-list-price ratio

2:02 — We are still seeing a fast market

2:39 — The pending sales, homes for sale, and number of homes sold

3:52 — We’ve been in an extreme seller’s market for a while

4:21 — We only have 18 days of inventory

4:56 — Interest rates have jumped, and that will affect the buying pool

6:27 — Wrapping up

If you have any questions or would like to develop a specific strategy for your situation, call or email my team and me. We’d love to hear from you.

Sellers: Consider Capital Gains Before Selling

Even though we’re in a hot seller’s market, you may not want to sell right now.

Considering how much homes have increased in value recently, many people are wondering whether they should sell their homes or cash in on their equity. Selling may or may not be a good idea, so today I’ll give people in this position something to consider: capital gains taxes.

Many people don’t really think about capital gains taxes until after their house has already been sold. When you purchase a home, the IRS determines whether you’ll pay short-term or long-term capital gains based on how long you’ve lived in the home.

If you’ve lived in the home for less than a year, you’ll pay a higher capital gains tax, so be sure to check with your CPA to find out exactly how much yours would be if you sold. For simplicity’s sake, you can expect to pay around 22% of your total profit. If you’ve lived in the home for more than a year, your capital gains taxes are reduced. Again, your CPA can give you a more exact figure, but you’re looking at somewhere around 10% to 15%.

 "If you’re pretty close to that two-year mark, then it may be a good idea to hold off on selling."

Now, if you are in a position where you have lived in the home for at least two out of the last five yearsand you’re single, you are exempt from having to pay capital gains taxes on up to $250,000 worth of profit. If you’re married, you’re exempt for up to $500,000. If you’re pretty close to that two-year mark, then it may be a good idea to hold off on selling.

Hopefully this has given you some helpful information to better inform your decision to sell or not to sell.

If you have any questions or need assistance, give us a call or send us an email. We’d love to be a resource for you.