Welcome to the Grand Illusion…
In my almost 40 years in this business, I have seen a lot of things regarding this industry. Great times and bad times, but with each bust and boom come some strange things and new ones. The latest thing I have seen is the continuation of the “multiple bid” thing, even in the slowest sales market I have seen in over 25 years. As stated above, the average days on the market in Metro Atlanta have risen to 28 days. So, if the average house sits on the market for 28 days…which means some longer and some shorter, I am still seeing “multiple bids” happening, which is truly strange given the average days on the market, but they are still happening, and even sometimes when the house has been on the market for weeks and all of a sudden…yep…folks are being told this is now a multiple bid situation and they need to make their highest and best offer. While I am not doubting that this honestly does happen from time to time, let’s face it…we are no longer in the 2021–2022 time frame.
The next oddity that I see, and this is not the first time I have seen this… is that folks who would have legitimately qualified for a new home in the $500K range with a minimum down payment two years ago are now trying to purchase a home once again in the $500K range (smaller home) and are finding out they no longer qualified due to where rates have gone. Two years ago, if you made $75,000 per year, you would most likely qualify for close to a $500K loan amount…today…you might qualify for around $300K, depending on down payment. They simply don’t understand how they were pre-approved in 2021 for $500K and now only qualify for $300K. Maybe..
“I am getting a 30-year fixed rate of 5.75%.” This is one of my favorites when I talk to folks, and they are shopping, and they have been told that the other lender is offering a 30-year fixed rate of 5.75%. If this were true, it would be truly unbelievable. Unfortunately, and most of us know this already, it is not a fixed rate but a 2/1 buydown where the rate goes from 5.75% in year 1 to 6.75% in year two and then 7.75% in years 3-30. I’m not saying this is not a bad option, but the potential issue is that the seller has to pay for the buy-down, which costs a little over 2.25 points, and the buyer has to qualify at the 7.75% note rate. It is a good program if the seller will pay the points and if you can qualify for your loan at the higher rate….but it is NOT a fixed rate. A client also said a lender offered them a true 5.25% 30-year fixed rate! Ironically, the lender was actually offering this, but it cost ten discount points to get this rate or over $28,000 to get them there, and the seller was not going to pay for it, and the buyer couldn’t pay for it due to “high-cost lending” barriers. But it was quoted by a lender.
Lastly, I am beginning to see potential buyers simply give up on looking for a new home due to several factors…high rates, the possibility of multiple bids, and the elimination of some, if not all, contingencies. Buying a new home should be fun for both the buyer and the seller. Unfortunately, that is not the case with many today. However, we are now seeing more and more sellers/builders pay $$$ towards closing cost and or buying down the rate for potential home buyers. This was a normal course of selling a home going back just five years ago and then disappeared (except in the new construction world). I hope this stays in place when this market turns around as this helps folks with cash out of pocket (one of the biggest hurdles for 1st time home buyers).
Remember… The BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
Thank you for reading this blog. I hope that the facts and insights I share provide value for you.
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Blog post date: Friday, October 27, 2023
