Recently I had an opportunity to interview again on Bay News 9 with Erica Riggins. Here’s the video and transcript of the interview.
Al Ruechel: In today’s in depth – our Erica Riggins sits down with a local broker associate, to discuss what effect impending rising interest rates could have.
Erica Riggins: Joining us now is Liane Jamason with Smith & Associates Real Estate. Thank you so much Liane Jamason. You have several offices in the Tampa Bay area. Thank you for talking with us about the housing situation right now.
Liane Jamason: Of course, thank you for having me.
Erica Riggins: So since the housing market collapsed, we are seeing a local recovery. A sellers market for some homes, a buyers market for others… talk about what we are seeing.
Liane Jamason: Yes, so we are at historic lows for inventory under $500 to $600,000. We are are about a 2.4 months supply of inventory which is very, very low. Very, very competive in those price ranges. Once you start to get up over $600,000 it becomes a little bit more of a buyers market. And then up over $1,000,000 is very much of a buyers market with about an 18 months supply in inventory.
Erica Riggins: Let’s talk about that sellers market more specifically. What happens when you have multiple offers on one of those homes? Of course everyone’s hopes and dreams once they pick their home is tied into that and are hoping for the best… What happens when you have multiple offers?
Liane Jamason: So, yes there’s a couple things you could do if you are the buyer to put yourself in a better position. First of all make sure that your Realtor is a strong negotiator. Make sure that you limit the contingencies that are in the contract, and something new that we are seeing is something called an escalation clause so I thought maybe we could chat a little bit about that.
Erica Riggins: Yes talk about the escalation clause.
Liane Jamason: For example let’s say you have a new listing out that is $100,000. Let’s just use round numbers, not that there’s too many of those out there. Your agent calls the listing agent who says, yes we have multiple offers coming in. So you attach an escalation clause to your offer and it basically says that you will pay X price for the home and you will increase your offer in increments of a certain amount up to a maximum price. So, maybe you say I will start my offer at $100,000 with $1,000 increments up to $110,000 as my max. So this can be a way to be beat out another buyer maybe if another buyer submits an offer for $108,000 then your offer becomes now $109,000. Then you could win that, but the disadvantage is your kind of showing your hand to the seller that you are willing to pay up to $110,000. They might just counter you at $110,000.
Erica Riggins: I see. So which should you not use that? Is that an automatic process – it saves time?
Liane Jamason: Yes it does. If you know this is the one, and you HAVE to have it and you don’t care if the seller knows what your bottom-line price is then that’s a good time to use it. You would not use an escalation clause if you’re not absolutely positive that there are multiple offers on the property.
Erica Riggins: We are talking about the Tampa Bay area. Where in Tampa Bay…what are the hot locations right now?
Liane Jamason: Anywhere where there are great school districts…Plant school district – South Tampa, Westchase, Fishhawk Ranch, these are all very popular areas. We are seeing a surge in the Heights area as well just because it’s very affordable homes and people like the Historic districts. The historic districts near downtown St Pete, these are some of the hot ones that we are seeing.
Erica Riggins: So people need to think about that escalation clause if you’re looking there. Does it help the seller in terms of the seriousness of the offer?
Liane Jamason: I think it does. I have seen sellers get very excited when they get an escalation clause because they know that their serious. They know that they’re going to get top dollar for their home. They’re not leaving money on the table then.
Erica Riggins: Let’s talk about the interest rate. The potential increase, we’re expecting an increase in the interest rate . How is that factor in for someone considering buying their home? How should they consider that?
Liane Jamason: For every one percent that the interest rate increases, you’re having about a 10 percent reduction in what you’re going to qualify for on a mortgage. That could be pretty significant. It can raise the amount of your monthly payment and then lower what you actually qualify for. It is definitely something that if you’re on the fence about buying, you definitely want to lock that in and lock in your rate as soon as you can.
Erica Riggins: Something to talk about with a mortgage broker?
Liane Jamason: Yes, for sure.
Erica Riggins: Awesome. Thank you so much – do you have any other advice on people buying the first or second home in this market right now?
Liane Jamason: Yes. Whenever we’re in a hot market there’s a lot of things that come out of the woodwork. “We will sell your home for one percent.” Or “we will pay all your closing costs.” “We will sell your home in 30 days or we will buy it.” BUYER BEWARE. These things are not always what they seem.
Erica Riggins: One other question – we were talking about homes over the half of million dollar mark – what’s your advice for those and the people in that market?
Liane Jamason: It is still a good market but you have to price your home accordingly and make sure that your home is in the best condition it possibly can be. The buyers have a lot more to choose in that price range and they are picky.
Erica Riggins: Those first-time homebuyers, what’s your advice for the first-time homebuyers?
Liane Jamason: Make sure you’re preapproved. There’s a big difference between prequalified and preapproved. Find a good realtor, read reviews online, find somebody that’s a strong negotiator.
Erica Riggings: Talk about the difference of prequalified versus preapproved.
Liane Jamason: I like to say prequalified is like you’re saying to me as the lender “I make $50,000 a year and I say, OK, you are approved.” If you are preapproved it means you show me your tax returns and you show me your bank statements and the lender actually verifies that you make $50,000 a year. And they actually have evidence of what you really qualify for. It is not just word-of-mouth.
Erica Riggins: Is it the buyer’s decision when they meet with the lender to decide I only want to go through the brief qualification process as opposed to preapproval?
Liane Jamason: Yes, sometimes buyers don’t want to have their credit pulled for one reason or another and you have to have that done to get the preapproval . To a seller pre approval shows a lot more seriousness.