The old adage "Timing is everything" is particularly relevant to the real estate market. The timing of a purchase or sale can increase the chances for a profitable real estate investment. Unfortunately, you often don't realize the opportunity until the time has passed.
Right now may be a time of opportunity, in this case created by negative news. Recently we've been inundated with a triple whammy of woes: low oil prices, an unbalanced state budget and presidential politics. Then Brexit piled on another layer of negativity. Historically, times of negative news have also meant opportunities for some to benefit by selling, purchasing or even refinancing.
Assuming personal circumstances are not forcing you to sell or buy, are you poised to take advantage of the current opportunities in real estate?
First, let's look at price ranges, which can reflect various opportunities. For example, homes priced under $399,999 are selling quickly — reflecting a seller's market of less than four months supply. If you are selling in this price range, your chances for shorter marketing time with possible multiple offers improve with a well-priced home in good condition.
If you are buying in this price range, pre-qualify with a lender so you are ready to act quickly if a property that fits your needs pops up on the market. Being prepared can definitely be to your advantage when other buyers also are waiting for just the right home.
When faced with competition, your offer to the seller needs to be structured more decisively as well. Remember many of those competing buyers have been focused on a small segment of the market, so they have a good idea of value. The two conditions when "low-balling" a property is not a good idea: when a new property comes on the market and there are multiple offers. Only after being bested by a more seasoned buyer do you realize you need to adjust your strategy.
The $400,000 to $749,999 range is more evenly balanced between sellers and buyers with a four to six month supply. In this price range, buyers have more choices. That means sellers must do whatever work is needed to make their property outshine the competition.
Conversely, many of the properties priced at $750,000 and above could be outstanding buying opportunities right now. Properties in this range are moving slowly — reflecting a buyer's market with six months or more supply. Negative news has pushed those who must sell to reduce prices for a better position against their competition. If these sellers purchased recently or just prior to the 2008 recession, they likely haven't experienced any real appreciation and may already be selling below their purchase price.
However, if your property is in this price range and you don't have to sell, consider staying a little longer. If you are looking to downsize into a smaller home or condo, your timing may not be the best. If you can hold, now may be the time to consider doing needed maintenance tasks or tackling those updating projects that will increase your home's value when you do sell. A word of caution: Depending on what you do and whether the project is taste-specific, you probably won't get 100 percent of the cost of those updates back when you sell.
Painting and carpeting might return 100 percent or more of the cost, especially if you are able to do the paining yourself. Both cover so much surface area that they can make a dramatic change in the appearance of a home. Just be careful you don't under- or overspend for the price of the home, and choose neutral colors. A new kitchen may allow you to recoup 75 percent of the cost for updating, while a new septic system is a maintenance item. Don't wait until the last moment, either. Give yourself an opportunity to enjoy the fruits of your labor before you move on.
However, if you are motivated to buy, two reasons could make this a good time. First, you have options to choose from. Second, negative news has caused interest rates to dip slightly. Yet, interest rates may not stay down long — perhaps only until the results of November's election, depending on how the markets react. For every percentage point that rates increase, you lose 10 percent borrowing power to maintain the same mortgage payment.
Finally, if you are happy where you are and plan to stay for a while, check into refinancing. See if lower interest rates are available or a change in your loan program is possible. Either might mean that refinancing makes sense.
Lower interest rates are not the only reason to refinance. You maybe able to eliminate mortgage insurance by changing loan programs. Perhaps the home improvements you did have increased your home's value beyond the 20 percent requirement. Changing loan programs would especially make financial sense if you have an FHA loan with mortgage insurance for life. You could save by lowering your payment and eliminating the mortgage insurance portion of your monthly payment.
Check with a lender to see the available options to reduce your monthly payment. Then use some of the savings for those home improvements and maintenance items, so when the time comes to sell, you will be in better condition than your competition.