Being a homebuyer in today’s market

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EVER WONDERED ABOUT BEING A HOMEBUYER
IN TODAY’S REAL ESTATE MARKET?

July 20, 2022 | Residential

Being a homebuyer can be confusing and overwhelming, which is why we are here to help! We’ve compiled a short guide for you to help you feel as confident and assured as possible throughout the homebuying process. The real estate market can change quite rapidly, so it’s always good to do some research beforehand. The real estate market can transition from a seller’s market into a buyer’s market, back to a seller’s market in a swift fashion. And with changing interest rates, it is important to understand the ins and out of the market right now.

Is it better financially to buy a renovated home or a fixer upper?

Hey, you future homebuyer (yes, you!) You’ve viewed a property and you’re interested in purchasing the home for an investment. Let’s make an offer! But, before we make any big financial decisions, let’s consider our options.
We’re gonna look at a couple of scenarios that you (or the seller) may encounter throughout the homebuying process. Often when purchasing a home, you’ll find two types of properties: move-in ready or a fixer upper or a complete wreck. Depending on your budget, current mortgage rates and home ownership goals, you may prefer one type of home over the other.
While a fixer-upper is typically the cheaper option, you may run into lots of problems down the line which can make the money you save on the housing price come back to haunt you. As a first time home buyer, you may want to buy your first home for as cheap as possible, however, if you are taking out a mortgage, you may want to purchase your home fully renovated. (We’ll explain later!)

As a seller, should you renovate your home before you put it on the market?

And, as a seller, you also have some options to consider before putting any property on the market: should you invest in the house and increase its value, or sell it as is? Sometimes the answer is not as straightforward as it seems. A renovated home may have a higher selling price, but can be more challenging to sell. We will look at these two options.

LET’S LOOK AT THE FIRST OPTION

WHERE THE SELLER DECIDES TO RENOVATE THE HOUSE

buying a home that has been renovated (for the buyer):

PROS

Can’t get a home renovation mortgage.

When you take out a mortgage to buy a home, you cannot get another mortgage for repairs. You will have to raise separate funds – either out of your own pocket, or take a separate mortgage after a while. Therefore, when you receive a mortgage to buy a renovated house, you will have to put off investing in the home remodeling for another 8-10 years.So, depending on your situation, it may be preferable to buy an already renovated home, even if the price is more expensive. As a first home buyer, you may not have the cash necessary to do the necessary repairs and may need to take out a mortgage to purchase the home. Buying a fixer-upper without the funds to fix the home will be a challenge.

CONS

Ugly & cheap renovation.

You may not like the renovation the seller decided to do and want to renovate the house again to your own taste. The perks of buying an unrenovated home is that you can tailor it to your style and design tastes.Also, sometimes sellers will also cheaply renovate their home just to increase the price, which means that you may buy a home with cheap finishes and a hastily done renovation.

investing in a home renovation (for the seller):

PROS

You can increase the value of your home

By investing $50,000 in a house, the seller can potentially increase the cost of their home by $100,000-120,000.

You don’t have to renovate the whole house

A common suggestion for sellers is to only renovate the spaces that add value to mainstream buyers. Most buyers care about updated kitchens (appliances, counter tops) and updated bathrooms than other rooms in the house. Before you begin any renovation project, be smart about what will actually add value to the price of your home.

CONS

Alienate potential buyers

When renovating a home, you can potentially alienate certain buyers who do not want a renovated property. For example, you may exclude buyers who want to invest in a fixer-upper and renovate the home themselves.

Or, you can alienate buyers who will not like your repair. Sometimes your style of renovation will not suit a potential buyer.

The investment may not pan out as planned

Sometimes, the money you put into your renovation may not be justified, and your home may not increase in as much value as you had anticipated. In this case, you will have lost both time and money towards the repairs and have narrowed your circle of potential buyers.

There can be a market downturn which can affect the value of your renovation. According to real estate statistics, on average, even with an investment of $50,000, a house may only see for $60,000-80,000 more in its sale price. And, worst of all, you may feel the economic effect of an unsuccessful renovation for a while.

HERE IS THE SECOND OPtION

WHERE THE SELLER DECIDES TO SELL AN UNRENOVATED HOME

buying a fixer upper (for the buyer):

PROS

You can reduce your home buying costs & alter the property to your needs.

When buying a house that needs a bit of work, you can typically get it for a better price. Furthermore, as a homebuyer who has an interest in design, you can renovate the house according to your needs and tastes. You also have the opportunity to divide a property into several apartments or allocate premises for business.

CONS

Rising lumber costs & supply chain issues.

Sometimes the house needs far more work that you imagined. These days with growing construction prices and lumber, it may be more expensive than ever to renovate your house. Furthermore lots of supplies and materials are on backorder so it may take much longer to renovate your home before you can move in. If you are not an expert in home renovation, it can be more difficult (and expensive) than ever to achieve an affordable home renovation.

selling a fixer upper (for the seller):

PROS

No additional work necessary!

You can sell your house as is! No need to spend additional money and time to impress a buyer may not end up liking the style of renovation.
Sometimes the market can change and your renovations will not hold up, in that the market has dipped and the money you invested into the renovation has not added value to your home.

CONS

Challenges closing the deal.

Sometimes when you sell an unrenovated home, you can narrow the circle of buyers who have ample money for the deposit and closing, and a good credit history. It can be more difficult to complete the transaction if buyers do not have sufficient funds (or have a difficult time securing a mortgage).

For any other questions regarding the business loan acquisition process ,
don’t hesitate to reach out to our team.

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FOR BUYERS AND FOR SELLERS

For buyers, it can truly be up to them whether they end up with a renovated or unrenovated home. There are a number of circumstances that can influence the practical and financial viability of this decision.

However, for sellers, it can be concluded that due to the current state of the market, it is better to sell an unrenovated house. However, each transaction is its own individual case, and there is always an exception.
The timing of the sale, the location of the house, the state of the market and mortgage rates…
All of these things can affect the cost of repairs.

REMEMBER TO GET
AN INSPECTION

When buying any home, a fixer upper, or a new build, make sure you get an inspection. Even when buying a fully renovated home, you always want to make sure that there are no hidden catastrophes waiting for you after you move in. When you discover any issues with the house through a proper inspection, you can get the seller to pay for repairs.

HOW TO GET THE BEST
MORTGAGE RATES

When you buy a home, you will probably have to take out a mortgage. As of late, homebuyers can enjoy lower mortgage rates than usual. These rates have created a hot market for sellers, which means that buying a home now can be competitive. However, interest rates are likely to rise, which could slow the market and make it easier to buy a home since we are no longer at the peak of a hot market. However, rising interest rates may also make it harder to buy a home, as mortgage rates will also rise.

THINGS TO DO TO LOWER YOUR MORTGAGE RATE

In order to get the best possible mortgage rate, you have to work on your credit score. Try achieving at least a 680, but strive for a 760 if possible. If you are having trouble increasing your credit score, there are other ways to try and get a good mortgage rate.
You can increase your income and pay off other debts to improve your DTI ratio. This may involve decreasing your spending and living more frugally. Another way to get a better mortgage rate is to save up and increase your down payment. While living frugally is not always fun, it can be a necessary investment in your future.
Another option is to consider a shorter term loan. A 30-year fixed rate loan will generally demand a higher interest rate than a 15-year. You must also decide whether to go with a variable or fixed term loan. Sometimes interest rates can decline which can make a variable rate loan more financially viable, however, this is not always the case.
Be sure to watch the markets and inquire with multiple lenders to try and lock in the best rate.

TRY REFINANCING YOUR MORTGAGE

If interest rates change for the better, you can always refinance your current mortgage to pay lower mortgage rates. When this happens you can basically change your current mortgage for a new one with a new principal and different interest rates. Talk to a loan consultant to see how you can achieve this. Refinancing options can be hugely advantageous for those who had to take out a mortgage under higher rates. However, make sure that this is a good idea for you financially, because refinancing your mortgage can temporarily lower your credit score.

CONSIDER A HOME EQUITY LOAN

If your house has gone up in value, you can take out a second mortgage known as a home equity loan. This home equity loan is made against the value of your home. It can be used to pay for debt consolidation, home repairs, or other improvements to your home. Home equity loan rates can vary between 3% and 12% and are fixed rate loans, which means that you pay the same rate over a duration of time. Currently, home loan interest rates are on the rise, which is something to consider if you are in the market for this type of loan.
Another option is a HELOC (Home Equity Line of Credit). This loan is also taken out against the value of your home, however, it is a variable rate loan, where you only pay back what you spend.
In order to qualify for either you must have a high credit score (680+) and have had your house appreciate in value. There are ways to get better rates on home equity loans like using certain banks or lenders.

HOW TO FIND A HOME FOR SALE NEAR ME:

Using sites like Zillow, Trulia, Redfin and Realtor.com, you can browse for homes for sale in your area. It’s also possible to find houses for sale by the owner through Facebook, Craigslist and other social media sites. When you are buying a home, you want to make sure that the price is in line with real estate prices in the area. So doing this type of research will help you make sure that you are getting a good price.

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Being a homebuyer in today’s market

EVER WONDERED ABOUT BEING A HOMEBUYER
IN TODAY’S REAL ESTATE MARKET?

Is it better financially to buy a renovated home or a fixer upper?

As a seller, should you renovate your home before you put it on the market?

LET’S LOOK AT THE FIRST OPTION

buying a home that has been renovated (for the buyer):

investing in a home renovation (for the seller):