Fall is typically not a popular time to buy a home. With several people expecting bonuses in the New Year – and with the holidays and cold weather to boot – many prospective homebuyers opt to wait for springtime or even summer. Data shows that home sales tend to drop during the fall months, only to pick up again around spring. However, if you are okay with shifting base in cold weather, buying a home during the fall might be worth your while.
Buying a home during the coming fall requires that you pay attention to different aspects. Ask yourself these questions so you may experience a smooth home buying process.
How Do Home Buying Seasons Work?
Come summer, you may expect the real estate inventory to heat up. It is common for sellers to place their homes in the market during summer. Prospective home buyers typically have the freedom to work around their schedules during this period, and they also look forward to favorable weather conditions. As a result, competition can be stiff, and bidding wars are not uncommon.
As fall begins to set in, people tend to get busier with their day-to-day affairs. While buyers usually drop in numbers, sellers try to take extra measures to sell their homes. Quite like the weather, the market cools. For some, this can be an opportune time to buy a home.
What is the Interest Rate Scenario?
Existing interest rates on home mortgages make this a favorable time to buy a home. According to data released by Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage stood at 2.88% as of Aug 8, 2020. This was 0.72% lesser than the same time last year. In the week that ended on September 11, 2019, the average interest rate was 3.56%. Interestingly, the average interest rate on a 30-year fixed-rate mortgage neared a peak of around 5% in the fall of 2018.
If the interest rate continues to drop in the coming months, fall might be a good time to get a loan for purchasing a home. Even if interest rates begin an upward trend, the possibility of any steep rise by fall seems rather unlikely. Waiting until next year, though, might not be the best way forward. With 2021 being an election year, there is no way to predict which way the market might swing, and interest rates may well increase again.
By getting a low-interest rate, you get to repay less through the course of your loan. Also, reduced monthly payments can translate into you being able to afford a more expensive home.
What Are Sellers Thinking or Doing?
More often than not, homes that are up for sale during the fall were put on the market in the preceding months. These are usually homes that have not managed to find buyers through the summer. One reason for this to happen is overconfident sellers who ask for more than what buyers are willing to pay. With their homes sitting on the market for months, most sellers begin to rethink their strategies.
It is common for sellers with unrealistic expectations to drop their expected selling prices during the fall. This is because they become eager to sell their homes, and might choose to accept lower-than-expected offers instead of waiting for six more months. By October, some sellers are willing to accept less than the market value of their homes.
Sellers are known to look at the tax consequences of keeping their homes on the market in the New Year. Since some may want to take advantage of their gains or losses in the ongoing tax year, you might find sellers who are inclined to get their homes off the market before the end of the year.
Do I have Many Options?
Inventory of homes up for sale tends to add up from the beginning of spring. As a result, several homes remain on the market through fall, and even up to winter. In winter, though, several sellers choose to take their homes off the market to minimize or avoid time-on-market penalties. If you feel you might have limited options from which to choose, carrying out some basic research will show you just how many homes are up for sale during this time of the year.
Will I Face Much Competition?
Most prospective homebuyers who have time to check property listings and attend open houses during the summer tend to get busier during the fall. What this means for you is reduced competition. Given that the school year gets underway and a new business quarter begins, fewer buyers remain in the market. This becomes apparent when you attend open houses and do not come across many prospective buyers.
If you are wary about going through bidding wars when buying a home, fall becomes a suitable time to make your purchase. What also helps is that you get the ability to spend some one-on-one time with the seller, and you may use this opportunity to work your way to a better deal.
What Can I Expect From My Real Estate Agent?
Real estate agents usually go through a slow period from September through February. This makes them all the more eager to drive revenue. With time on their hands, it is common for real estate agents to go that extra mile to strike deals during the fall. While real estate agents should help buyers identify and avoid common home buying mistakes, they also need to provide situation-specific expertise. What you may expect from your real estate agent includes:
- Finding listings based on your specific requirements
- Selecting a home inspector
- Being a part of the home inspection process
- Addressing any repair requests
- Communicating with your attorney and the seller’s agent
- Negotiating an offer
- Finalizing the closing
What Do I Need to Know About Negotiating?
The market typically favors sellers during the summer months, where they get to set the terms. Come fall, prospective buyers dry up, giving you an upper hand at the negotiation table. This is because there is an increased possibility of motivated sellers making concessions during the colder months. Some sellers might give you enough time to go through the negotiation process and even offer to make arrangements that are convenient for you once they know you are a serious buyer.
Can I Benefit Through Tax Breaks?
Once you decide to move from being a renter to a homeowner, you may look forward to some tax benefits. New homeowners who know of applicable tax deductions can use their homes as legitimate tax shelters. If you plan to buy a home during the fall, property tax and mortgage interest deductions apply to your income for the entire year, even if you purchase in December. What you need to understand is that all the payments you make before the loan’s closing are tax-deductible. Since these amounts can be significant, you can look forward to some serious savings through your taxes.
Does the Fall Make Flaws More Apparent?
Yes, colder months offer a truer picture of what homes actually look like. Consider this – you look at home in May and it appears picture-perfect, with plants in full bloom. However, unknown to you, the foliage manages to provide excellent camouflage to a cracked wall and peeling paint. When you look at the same home in the fall, without its green cover, you get to see a completely different picture. Besides, this also gives you an indication of how a household up when the going gets tough, either in the form of rain or chilly temperatures. When you carry out a home inspection during the fall, you decrease the possibility of getting nasty surprises months after you make your purchase.
Will I Get a Clear Picture of the Neighborhood?
Several people tend to go on vacation during summers when schools are out. This might lend an appearance of emptiness to some neighborhoods. Once the school year gets underway in September, people return to their regular routines. This makes it a good time to get a clearer picture of a neighborhood, be it through driving around, checking local schools and health care centers, or even shopping for basic necessitates.
Will I Get the Professional Help I Need to Get Through the Process?
Quite like real estate agents, most of the professionals associated with the real estate industry tend to experience a lean period during fall and winter months. As a result, they remain enthusiastic about any work that comes their way. For instance, finding a mover to help you move over a weekend is much simpler in fall than in summer, because summer makes for a much busier period. This also applies to services provided by home inspectors, contractors, painters, plumbers, and electricians. Other than quicker availability and more attention, you may also look forward to discounted or lower prices when seeking professional services in the fall.
If you need to shop after moving into your new home, the holiday season is the perfect time to look for bargains. No matter whether you need home appliances or furniture, you stand to benefit through a range of seasonal specials thrown your way.
Are There Any Tips That Can Help Me Buy the Right Home?
Following some basic home buying tips can simplify the process and help you avoid some of the common pitfalls.
- Check your creditworthiness. You need to look at your creditworthiness at the onset because your credit score has a direct impact on the interest rate you get on your mortgage. You stand to get the best rates if your score is over 750. Scores between 700 and 750 also tend to get competitive rates. If your credit score is any lower, you may expect to pay higher interest.
- Choose the right type of loan. Depending on whether you qualify, you might benefit by getting a government-backed loan. For instance, the United States Department of Agriculture (USDA) provides home loans for rural homebuyers as well as for homebuyers in suburban areas of large cities. The Department of Veterans Affairs (VA) provides loans for veterans as well as their families. When selecting the right loan, you also need to educate yourself about different types of interest rates and loan terms.
- Think about the down payment. You need to determine just how much money you can put toward the down payment of your home. Bear in mind that the more you pay toward the down payment, the lesser you pay in interest through the course of the loan. However, while conventional knowledge suggests paying at least 20% of a home’s selling price as down payment, some people get on the homeownership path by paying little to nothing as a down payment. Examples of no down payment loans include USDA loans and VA loans.
- Get cash to the table. With adequate inventory to go through, buyers tend to stand at an advantage when negotiating. You can further swing the momentum in your favor by using cash to make your initial payment. Other than helping you seal a deal quickly, a cash payment can also wipe out any apprehension a seller might have when accepting a check issued by a third-party lender. A cash payment gives a seller the peace of mind of having secured the required funds, and the risk of losing out on a deal during the closing stages all but disappears.
Conclusion
If you have been thinking about buying a home, this fall may be as good a time as any to put your plan into action. Interest rates are at all-time lows, several sellers are keen to get their properties off the market, and you don’t have to worry about too much competition. If you wish to start the process, consider getting a pre-approval by contacting one of our loan officers.
DISCLAIMER:
30-YEAR FIXED-RATE MORTGAGE: THE PAYMENT ON A $200,000 30-YEAR FIXED-RATE LOAN AT 3.875% AND 80%LOAN-TO-VALUE (LTV) IS $940.14 WITH 0 % POINTS DUE AT CLOSING. THE ANNUAL PERCENTAGE RATE (APR) IS 4.026%. PAYMENT DOES NOT INCLUDE TAXES AND INSURANCE PREMIUMS. THE ACTUAL PAYMENT AMOUNT WILL BE GREATER. SOME STATE AND COUNTY MAXIMUM LOAN AMOUNT RESTRICTIONS MAY APPLY.
