Your Loan Officer for Life

For many, the current economic climate is the absolute best time to buy a house. Yes, you read that right. Even though constant interest rate hikes have caused mortgage rates to jump to their highest levels in years, there are other factors to consider which could make a home purchase in a high interest rate environment a very wise move.

The home buying environment has been more challenging in the past 2-3 years than at any time in recent memory. Very limited inventory across a combination of both new home construction and resales on the market gave sellers a huge advantage over buyers. It’s simple supply and demand. Millions of sellers leveraged this inequity (which resulted in multiple buyer prospects for every listing) to raise home prices to record heights.

Buyers were forced to pay these prices if they wanted, or in many cases, really needed to buy a home. The conventional wisdom quickly shifted from offering less than the list price—in some cases maybe even floating a lowball offer—to offering more than the seller was asking. That quickly became the norm in many markets due to stiff, deep-pocketed competition for every listing.

This resulted in many potential buyers, particularly first-time homebuyers, being frozen out of the market. The silver lining for homebuyers in this high mortgage rate environment is that the red-hot housing market has cooled down considerably. The number of listings, especially new construction, is on the rise—and average prices are on the decline.

The world of Real Estate has changed

The dynamic has quickly changed from making offers above the list price to making offers at, or slightly below the list price. For some buyers, this means that a house that was out of reach a year ago could now be well within their price range, and they will very likely find sellers to be more flexible when negotiating home inspections, closing costs, and other terms.

Won’t the monthly payments be higher due to interest rates? Yes – for a short while. There is no question that interest rates should come down before too long. When they do, you can refinance at the lower rates—on the house you wanted all along at a great price. You’ll pay more interest temporarily, but that payment will drop once rates come down and you refinance. Plus, you may be able to take cash out when you refinance for upgrades like finishing a basement, etc.

Make today’s high rates work FOR you

As rates fall, the value of your home will increase at the same time. This is the reverse of the current market, where higher rates result in lower home prices. When the rates fall, home prices rebound almost immediately.

You’ll wind up paying less each month and building equity at an accelerated pace. Don’t forget the many advantages of owning your own home vs renting from a landlord. Speaking of which, rental rates are skyrocketing right now, so you have that going for you as well.

It could well be that purchasing a home in a “Buyer’s Market” could be the best decision you ever make—even at today’s high interest rates.

When you’re buying an older home, the Home Inspection is so much more than just a checkmark on your pre-closing checklist. The wise home buyer will pay particular attention to the Home Inspection before finalizing their offer on a home.

Act Soon

A typical offer will include a clause along the lines of “subject to Buyer’s acceptance of a certified home inspection.” In simple terms, this means you can still change your offer, or even walk away from the transaction, without penalty for any reason. Think of it as your last chance to be 100% certain you want to buy this house…at this price.

The “subject to Buyer’s acceptance clause” will include a fairly quick time frame, so you’ll need to act quickly in completing the inspection. An aggressive seller’s agent will push for a very short window, such as 7-10 days. As a buyer, you want as much time as possible to ensure the process works well and to your benefit. Two to three weeks is a comfortable timeframe, although a longer period might cause the seller to reject the offer altogether if there are multiple offers on a property.

Check Different Vendors; Budget for your Needs

You should research home inspection companies early on in the house hunting process. That way you have a short list of potential candidates when you need one quickly. Your realtor will likely have a few names for you to consider. Rates vary depending on geography and scope of services… $400-$600 is a ballpark estimate.

Be With the Inspector

It’s a good idea to accompany the inspector when the inspection is conducted. Even though you’ll receive a copy of a very detailed report afterwards, you’ll have a much better understanding of any issues that surface during the walkthrough.

As an added bonus, most inspectors will share their knowledge and opinions with you verbally but not include them in the written report. This information is invaluable in deciding whether to abandon the deal—if the inspector shares that a specific item is a deal-killer. It could also be a good negotiating nugget if he tells you a certain item looks significant but the fix for it is very simple and inexpensive. If you’re not really handy, most inspectors will also give you directions as to how to correct any deficiencies yourself.

The Inspection Report

You’ll want to share the final report with the seller, along with any counter-offer. More often than not, the seller will propose a price reduction based on the anticipated cost associated with each issue they agree to remedy rather than correcting the issues. This avoids closing delays and potential disagreements around the quality of each repair.

You’ve Got This!

Plan early. Budget for the inspection. Have an inspector or two close at hand and be involved. The Home Inspection part of the home-buying process is very much for your benefit.