Handling Multiple Offers And How Interest Rates Affect Your Offer
The first question a buyer typically asks me is how do I avoid multiple offers? There's no real way around that so let's discuss how you navigate through it should you end up in that situation. Currently in the Minneapolis-St. Paul metro area we have a little over 5000 homes that are active in for sale. That may sound like a big number but I assure you it's not. It's 30% down from last year which was also low. When you look at a 13 County metro area that has over 3 million people living in it, 5000 houses for sale just doesn't cut it. Now, this does not include new construction so the numbers will be a little higher.
If you are a buyer looking in a specific price range you have to realize that you have a lot of competition are looking at the same homes. Chances are more than one buyer will fall in love with the same one that you do because it's probably better than a lot of the other ones for sale. Until the market changes, if you want to purchase a home you may just have to deal with multiple offers.
In a situation like that one of the things you want to consider is how interest rates will affect your offer. I'm to give you an example that's just simply rough math and to get the accurate interest rates and payments you'll need to talk to your local loan officer.
Let's say there's a house for sale for $225,000 a goes in a multiple-offers see you offer $250,000 for the property. I know the first thing your thinking is this is insane. Perhaps, but at the same time, this house might've been underpriced. So please stick with me. You put 10% down at an interest rate of 4%. Your payments will be about $1511 a month.
Fast-forward six months or even a year from now. Let's say the interest rates now or 5% but you don't have multiple offers to deal with. You find that same home for $225,000 and you write a full price offer. You put 10% down and at a 5% interest rate, your payments are $1489 a month. At that point your only saving $22 a month. So one of the things you have to consider is how the interest rate change could impact you.
Interest rates up until this last year have stayed pretty level for seven years or so. Sooner or later they're going to have to go up and we are seeing some movement now. So before you pass off the idea of paying a higher price in multiple offers for a home you absolutely love, consider how that interest rate will affect you down the road should it increase.
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