Buying a new home and selling your current one can seem like a daunting task. The biggest struggle for most people is knowing their options and determining a realistic plan of action. Finances will play the largest role in this decision, but other factors are a consideration including the local real estate market, ease of moving, and the cost/availability of the next home and possibly an intermediate place to stay. So what are the different options? 1) Sell First, then Buy This is probably the most common option people choose. Most people have the financial requirement to sell their current home in order to purchase another. The benefit of this type of move is you don’t have to worry about carrying two mortgage payments. The negative is you will most likely end up moving twice. An inexpensive interim option is to move in with family while searching for your next home. Others opt for flexible apartment leases. Once your home is under contract, you could start looking and bidding on homes.
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In September last year, the greater Grand Rapids housing inventory started an uptick and continued for four months straight. This is the first time that has happened in the last five years or so. We went from a yearly low of 1.3 months of inventory up to 1.9 months by the end of 2016. Many were predicting the market to finally level out a little. However, from December through the end of January, inventory suddenly fell back down to 1.4 months. Last spring was a crazy market with buyers sometimes competing with 10+ offers. This year we have even less inventory than last as we lead up to the spring market. Buyers will need to be diligent, patient, and put their best foot forward in the home buying competition. Sellers have the convenience of short market times and multiple offers to choose from if the house is priced right. If you live in Michigan and own a home, then you absolutely need to know about ice dams. Water intrusion is the number one cause of damage to homes and that damage can be very costly. Ice dams are formed when snow melts on your roof, but freezes when it gets to the eaves (the part of a roof that overhangs the walls of a building). If the ice builds up, it can form a ridge that prevents water from draining. If the water cannot drain properly, there is only one place for it to go, and that is down into your house. This can happen to any roof, regardless of age or condition. The problem lies not with the roof itself, but by heat loss through the attic due to a lack of insulation and ventilation. Earlier this year, the spring market was a house feeding frenzy. Popular homes were receiving 5, 10, sometimes as high as 20 offers. March and April saw a housing inventory of only 1.3 months. It is too early to call for sure, but I believe this was the peak of the rising prices for the Grand Rapids market. Over the last four months or so, we have seen the inventory levels increasing. Each month we have slowly ticked up to the current level of 1.7 months. That is still a very low level of inventory, however, the day-to-day pace of the market is noticeably slower. Homes are still selling quickly and multiple offers are common, but it is not as ridiculously competitive as it was this spring. Experts have been predicting inventory levels and price increases to level off for a couple years now. It may be finally happening. In the last few months, the inventory level has tightened again. All the way down to 1.3 months. This is a historical low for the inventory of homes for sale in the Grand Rapids market. Although inventory was dwindling, the number of buyers increased with the spring market. The result? Feeding frenzy is probably the most accurate way to describe the competition. If a house is priced right and in good condition, it is common place to see 5-10 offers on one property within three days of hitting the market. Open houses look like assembly lines of people going in and out. It is great to be a seller right now. Unfortunately, it is very difficult to be a home buyer at the moment. The buyers who are winning in extremely competitive situations are usually cash buyers, or buyers who have large down payments if they need financing. It makes it especially tough for first-time buyers trying to enter the market. There are a lot of factors that are important to a seller when considering whether to accept a buyer's offer, especially when there are multiple offers to choose from. Here is a list of some of the most important factors a seller will look at: 1) Price- this is likely the first thing the seller will consider. Most people want the highest price possible for their home. If the buyer is asking for closing costs, the seller will subtract this amount from the offer price to figure what the net amount is. For example, let's say two buyers write offers for the same price of $150,000. However, one buyer is asking for the seller to pay $4,000 towards their closing costs, and the other is not asking for any. One offer is a net of $150k while the other is only a net of $146k. Obviously the higher net offer is usually more desirable to a seller. Over the last three years of giving market updates, I am starting to sound like a broken record. The real estate story of Grand Rapids, MI in 2015 was quite similar to 2014 and 2013. The inventory of homes for sale has remained low, and prices have been steadily increasing. It has been a great market for sellers and a frustratingly competitive market among buyers. Interest rates went up and down a bit throughout the year. Right now they are sitting around 4.0% for a 30 year loan, which is still quite low when you look at the history of interest rates. In December 2015, there were changes made to the real estate transfer tax exemptions in Michigan. If you did not qualify previously, but now qualify for an exemption under the new rules, you may go back up to four years and request a refund on the transfer taxes you paid. WHAT CHANGED? So what changed exactly? On 12/16/15, governor Snyder passed a bill that simplified and clarified exemption "U". Exemption "U" applies when the SEV (State Equalized Value) at the time of the sale is less than or equal to the original SEV when purchased. The idea of this exemption is that if you sell your house at a loss, you do not pay transfer tax. The only other requirement is that the home was your primary residence. Many people enjoy the idea of becoming a real estate investor. An abundance of infomercials and HGTV programming make it seem so easy and glamorous. The reality is that it is not always easy. Real estate can be a great investment, but educate yourself and understand what you are getting into before you make the plunge. BUYING THE PROPERTY When purchasing a property, the first step is to get pre-approved for a home loan. Be sure to specify whether you want to purchase a single family or multi-unit residence, and whether you plan to occupy it. Based on this information, there are different types of loans available, and different requirements for each loan type such as down payment amount, interest rate, and other costs. Typically when purchasing investment property, larger down payments are required. When house hunting, you will want to consider a number of factors that make a rental desirable. Location is first and foremost. Size, condition, and neighborhood amenities are other important factors. It is tough to be a home buyer right now in the greater Grand Rapids area. Why...? INVENTORY. Inventory is pretty much all we have been talking about for the last 2 years. The lack of inventory of homes available. Inventory of homes for sale is measured by determining how long it would take to sell all current homes for sale if no new listings came to the market, based on the current rate of how many people are buying. A normal market is considered to be an inventory of 6-6.5 months. Back in 2008, we had a whopping 13-14 months, a market that strongly favored buyers. In 2012, the inventory started dropping and has not stopped. The strong buyers' market is a thing of the past and has been replaced by a market extremely weighted in a seller's favor. |
Lisa VanderLooGreat info on everything real estate. Categories
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