Blog

Happy New Year, and what a way to start!

Posted January 13, 2025 in Real Estate Trends

tracie demars, Clark County WA real estate agent

Let’s talk about Real Estate. If you are a buyer, we are coming to the end of the ‘best time of year’ to be a buyer’. As people start getting their tax refunds next month, we will see the market start to pick up. If you are a seller looking for the ‘best time of the year’ to be a seller, March-May is coming. February can go either way.

Did you know that 2024 was the worst year for real estate in the past 30 years? While I was talking with a friend about that, she asked if multiple offers are still happening. These depend on the home, area, and price range. Some price ranges and homes are still getting multiple offers, especially if a home is underpriced to encourage those offers to compete.

I personally felt that 2024 was much better than 2023, but that’s just what I noticed locally. No one knows what will happen this year. The market is still in a state of flux, and there are many variables that could move it either way. The market has adjusted to interest rates, and the slower market opens homes that have negotiability for buyers. The home may be negotiable in price and/or seller-assisted closing costs.

What are closing costs? Closing costs are the fees associated with the transfer of property ownership, and the fees associated with the buyer’s loan. The sellers have their portion of the closing costs, and the buyers have their portion. The amount of closing costs for either party can fluctuate. For buyers, the fluctuation can be huge between one buyer and another, depending on the buyer’s loan type, credit score, interest rate, the lender they are using and their fees, and whether the buyer is ‘buying down the interest rate’. All lenders are going to be very close to one another, but the real difference is what their fees are. You might be able to get a lower rate… for a fee. This is called ‘buying down the rate’.

Let’s say you want to borrow $1,000 from me for a year. I give you 2 options:

A – I can loan you the $1,000 for a year at 0% interest rate, or
B – I can loan you the $1,000 for a year at a 5% interest rate.

Which one do you want?

Of course you want 0%, right? Well, you don’t have the full story either. Remember that 28 people are involved in the purchase/sale of a home, and everyone who goes to work wants to be paid for their work. That is fair.

Option A: I need to charge you to pay for those folks, and to get that 0% interest rate I am charging you $300 in closing costs.
Option B: I need to charge you to pay for those folks, so I am going to charge you $50 in closing costs.

We meet in a year so you can pay me back, but how much of your money do I have?

Option A: There is no interest, but I still have $300 of your money that you gave me for closing costs, and to get that 0% interest rate, so it cost you $300, or 30%.
Option B: You give me my $1,000 back and $50 interest. You only paid $50 in closing costs, so I have a total of $100 extra from you, so it costs you $100 to borrow that $1,000 from me, or 10%.

What option do you want now? A or B?

For some buyers, this may be an amount that they can’t pay upfront, so they write it in their offer. This is when someone says, “The seller paid my closing costs”. The seller never pays the closing costs though, so what does this mean? When a buyer’s offer includes closing costs, it is a deduction from the net of the seller, but it is built into the purchase price of the home, and the buyer’s loan. The buyers are paying for their closing costs by wrapping it into their loan. For the buyers to wrap the closing costs into their loan though, it must be included in the offer.

It really doesn’t matter what the seller wants to sell the home for, or what the buyer is willing to pay… it depends on what the home appraises for. The bank will only loan either the purchase price or the appraisal amount, whichever is less.

These are things that often confuse people, and oftentimes Realtors and lenders don’t explain clearly. I will talk about the importance of sewer scopes next month.

As always, I’m here to answer any questions. Call, email or text me anytime!