Would not it be great to say that as mortgage interest rates rise, your real estate business would rise right along with them?
Well, stick with me and let's see what we can do. I've always said you gotta have a plan in business – true in real estate and true in mortgage lending – I've worked in both professions for many years now, so I might be able to help you.
So, do you have a plan, a strategy? What will you do to keep your sales strong if interest rates rise this fall and winter?
It's looking likely they will climb. Many groups and experts are predicting a gradual increase. As I write this, rates are 4.1 percent and I expect we'll see something near 4.8 percent by the end of the first quarter of 2015.
Here are some cornerstones for a plan to keep your business warm through the winter:
Let buyers know:
1. Buy now or pay later. It's that simple. You have to play the immediacy card with buyers in this market. Remember, consumers act based on what they might lose versus what they might win. If they do not act, they lose by paying more every single month quite possibly for most of the rest of their lives. You know the math: at 4.5 percent on a $ 200,000 house, their monthly payment will be $ 1,013. If rates rise one percent, the payment balloons to $ 1,136. That's $ 44,280 over the life of a 30-year mortgage.
2. Getting a mortgage is not as tough as they may think. Many mortgage companies have access to credit repair help. I know Kalamazoo Mortgage in Michigan (which I am currently coaching) does this regularly for Realtors' buyers, and deals are closing and people are ending up in their dream homes.
Let sellers know:
1. More housing inventory is coming to the market. Rehabed REO homes will be entering the market later this year and in early 2015. You'll remember that back in 2009 the banks did not have time or money to rehab REO properties so they were being sold in as-is, where-is , looks-as-is and smell-as-is condition. But these REO homes will be in good shape and FHA financeable condition. Plus, cash buyers are becoming rarer. This means more inventory and reduced competitive bidding giving more first-time buyers and other non-cash buyers more opportunities. In other words, they should sell now versus waiting.
2. Even if homeowners have an interest rate lower than the current one, (CNN Money reports 19 percent of homeowners refinanced between 2011-13 when rates were historically low) it's likely their home has appreciated in price to make up for any received loss. Now is the time to sell and get in the house they really want – one that's bigger or closer to better schools – instead of feeling stuck in one that might not be suiting their needs.
Let me hear from you. Do you have a concrete plan in place to help you keep your business strong in the face of changing markets and conditions? What can you start doing today to improve your business in your farm area?