Home Selling in 94523>Question Details

Charles Husen, Real Estate Pro in Pleasant Hill, CA

Agents use low interest rates as a motivator for the buyer. Would it not be better for everyone if we used rising interest rates to motivate sellers.?

Asked by Charles Husen, Pleasant Hill, CA Tue Dec 14, 2010

Since we must chose to say that low interest rates either help buyer or help sellers. Would it not be better and also more mathematically accurate to explain to sellers that now is the time to sell because of the low interest rates?

The math suggests that as rates rise, the price of the home must be discounted to keep the same payment. So does it not make sense to suggest to sellers that now is the time to sell?

Two weeks ago $515,000 home, 20% down had a payment of $2,000.

Tomorrow the same home in a 5% rate environment, to have a $2,000 payment must be sold for $466,000.

Once China slows it's purchase of our treasury bonds in a 2 years and rates go to 8% then that same house, to have the same payment will have to be sold for $341,000.

This is a 47% loss due to interest.

Upper end sellers are unrealistic on prices. They need a push to sell NOW!

Should we not be on the roof yelling to the upper end fence sitters, "NOW IS THE TIME TO SELL, BEFORE RATES GO UP!"

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Carl Medford’s answer
Charles:

Not so much.

You state, “Upper end sellers are unrealistic on prices.”
I’d respond by saying, “That’s their prerogative.” When their homes have been on the market for months and don’t sell, they’ll learn. Or they’ll take them off them off the market and ‘wait’ for the market to ‘improve.’ If it ever will. And if they DON’T learn, it’s not because they haven’t had plenty off opportunities to do so. On the whole, the upper-end homes belong to very well-educated people. They try to figure the angles on everything and then work the system to their advantage. Once they think they have it figured out, they’ll insist on doing it their way and will just have to learn their in own way and in due time. No amount of ‘splainin’ from me is going to work.

Some of them just need another degree – from the school of hard knocks.

And then you further say, “They need a push to sell NOW!”
To which I’d ask, “WHY?” People sell for a number of reasons that relate to personal motivations. I’ve learned over the years that it is not in my best interest to try to motivate anyone in real estate. I’m a facilitator, not a motivator. That’s why my clients keep coming back: they know they’ll get honest answers without the drum beating and hyper-sales pitch. When they ask for my opinion, I’ll give it to them and it will be based on solid market data and analysis, not hyperbole.

And then you finish with, “Should we not be on the roof yelling to the upper end fence sitters, "NOW IS THE TIME TO SELL, BEFORE RATES GO UP!"”

You go. Good luck with that.
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1 vote Thank Flag Link Fri Dec 17, 2010
BEST ANSWER
Hi Charles. The way I see it is that in the current climate it takes a compelling reason for someone to sell. You'll always have the fence sitters that don't seem to be convinced by any reasoning other than the realization that they waited too long. When people ask me when prices will go up again, I tell them essentially what you said. I believe prices will go down more before they will go up again and if you have to sell, yesterday was a better time than today or tomorrow. This may be a little bit exaggerated, but get the point across. Yes, we will see inflation combined with rising mortgage interest rates and since the average citizen will not make more money to pay more interest, something will have to give in order for houses to sell. If they mess with the mortgage interest rate deduction, one less reason to buy.
1 vote Thank Flag Link Wed Dec 15, 2010
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
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Thanks Ute, I agree with you. You seem like a very compasionate Realtor.

I would like to add that in a market like Sacramento one could argue that the low home prices could usurp the rising interest rates somewhat.

I used to live in Sacramento and I am amazed at the drop in prices. A couple of weeks ago I was looking on the Sacramento MLS and saw a home on Mohawk Drive in Fair Oaks that was priced at $145,000. It looked like the same home that I was thinking of buying in 1990, and the asking price at that time was $145,000. Zero gain in 20 years! Amazing.

Here in the Bay Area some of the low end areas are priced at 1998 prices. I am not worried about my clients buying into these areas. Even in a rising interest rate environment.

But some of the high end areas like Lafayette and Alamo are still trending at 2005 prices. Rising interest rates could have a big effect on these overpriced jumbo loan bearing bubble priced homes.
0 votes Thank Flag Link Wed Dec 15, 2010
Charles,

Whatever pitch is used has consequences that are counterproductive. For example sophisticated buyers will reply "If rates go up won't prices go down?" They might...who knows. I shy away from any short term "angle" because in this environment where events are changing every two months, you cant guarentee that rates will go up in the future. The fed could buy another trillion in debt and rates will remain right here for another two years if the economy continues to plod along.

Buyers should focus on the long term and uncompromisingly find a home that affordably meets all their needs.
Web Reference: http://bob2sell.com
0 votes Thank Flag Link Wed Dec 15, 2010
Under the assumption that today's owner would be buying another property to live in, I would have to say no.
Web Reference: http://www.321property.com
0 votes Thank Flag Link Wed Dec 15, 2010
Charles,

Real estate is a simple game. You need motivated buyers and sellers. The theory that you can somehow motivate a buyer or seller to do something is off. It's not necessarily an impulse buy or sale. What works is screening your prospects for motive and working with the ones that are most motivated to buy or sell based on asking them a few key questions. If your next question is where do I get the prospects, hook up with a real estate coach such as realestatetrainingwithdavidknox.com as it will benefit your business greatly. Standing on the roof yelling, just creates noise. If you are not asking open ended questions of the prospects you are wasting your time.

-Ed
0 votes Thank Flag Link Wed Dec 15, 2010
Sure, if you like. I think we're taking this 'way too seriously - the real estate world doesn't revolve around the blarings of the brokers.
0 votes Thank Flag Link Tue Dec 14, 2010
Have we forgotten that the true cost of ANY loan is how long it takes to pay off? We were paying 18% on money in the early 80's, STOP SELLING ON RATE!!!!! it is what it is. Sell the property!!!!
0 votes Thank Flag Link Tue Dec 14, 2010
Charles,
It all translates to affordability. Lower rates make my listings affordable to more buyers, potentially netting my sellers more money. Most of my sellers are also buyers and the low prices and low rates mean their next home will be more affordable too.
If a $200,000 house lost 20% of its value in the decline, it's worth $160,000 now. If the move up house they want to buy was worth $500,000 at the peak and lost 20% it's now worth $400,000. The spread between the values has been reduced by $60,000.
Between low rates and low prices, this can be a very attractive market for many.
0 votes Thank Flag Link Tue Dec 14, 2010
Charles: Every time rates go up then that's the kind of posts you will begin to see! "Buy Now Before Rates Get Any Higher"! :)

The thing is that it's a good time to buy when a buyer is really ready for home ownership responsibility and or investment responsibility!
~~~
0 votes Thank Flag Link Tue Dec 14, 2010
of course, the more rates rise, it diminishes their purchasing power. However, I believe these forces are very inverse, so when rates go up, you will in fact see prices flat or down to compensate.

Its almost a zero sum game to be honest.
0 votes Thank Flag Link Tue Dec 14, 2010
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