The recent housing market throughout California can best be described as “on-fire.” Even with rising interest rates, it is largely understood to be a seller’s market. If you’re wondering what a seller’s market is, it’s defined as a market trend with less inventory than buyers looking to purchase, often driving prices upward. This concept of supply and demand is in actual practice.
As fewer and fewer homes are available, and there is an abundance of people looking to buy a home, sellers can be more selective in what offers they choose. As such, that competition makes buyers have to make more substantial offers than if homes were abundant for sale.
So how does a new buyer find ways to be competitive in a seller’s market? And what are the benefits of homeownership? Let’s look at the benefits of homeownership first and then answer the best practices for a new home-buyer to make an attractive offer that the seller will accept.
Benefits Of Homeownership
There are benefits to homeownership that far extend the most obvious. Being able to call a house yours is a level of pride unlike any other. But there are significant tax benefits, building equity and wealth over time, possible passive income opportunities, and stability in residency for you and your family.
Tax Advantages
There are local, state, and federal tax advantages to homeownership, depreciation and maintenance deductions, and other tax deductions associated with long-term ownership.
Leveraged Wealth Building
The benefit to homeownership is that it is only a few areas where a person can leverage their debt to make wealth. Here’s how it works: a person takes on a mortgage from a bank or lender to buy a home worth more than the individual has in equity. Then, during the repayment time, the loan principal decreases while the home appreciates increasing value. This leverage of debt to wealth is one of the few ways a person can use someone else’s money (the lender) to make more money than borrowed.
Increased Equity
Homes appreciate the physical house over time and the land it sits on. The appreciation rate will vary based on location and market trends, but appreciation can generally reach 10% or more.
Passive Income Opportunities
Owning a home also allows the potential for a passive income. As the owner, you can choose to live in residence or rent it out. By renting, you are having someone else pay down your debt while covering your bills, making long-term revenue through those rent payments.
Home Buying Tips for First-Time Buyers
If you’re a first-time buyer, there are a few pointers to know before you attempt to buy a home.
Choose a Knowledgeable Agent and Broker
First and foremost, you need an expert to help you navigate the home-buying process. Knowing the market is crucial to helping you understand the type of home you can be most competitive on, whether you’re looking at Camarillo homes for sale or other properties throughout California.
In addition to helping you understand all the ins and outs of the market, negotiating a great deal, and understanding documents, inspections, and terms of the agreement, an experienced agent and broker are more than worth the money spent.
Additionally, the buyer’s agent is paid by the seller to bring them an offer, so except in rare circumstances, the buyer’s agent is paid by the seller. You owe them nothing!
Get Prequalified
To make a competitive offer, one of the ways to stand out from the crowd is to be prequalified for your loan before submitting a bid. Organizing your finances and not making any sizable purchases or selling debts before financing are great tips for becoming prequalified. In addition, being prequalified lets you know a realistic range for you to consider in your home shopping.
Put “Skin” in the Game
Skin in the game is simply making an offer with a higher down payment than standard. For example, 3% is the average down payment, contrary to the 20% most people think. Upping your down payment lets the buyer see your interest and sincerity, making them appreciate your offer.
Shop Year-Round, Buy Somewhere in August to January
To find the best deals, you need to follow the market trends and see what’s available. Typically the market heats up from late spring to early summer and begins to cool down in the fall. So shop year-round, but position yourself to make an offer in the fall just before the holiday season.