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Hey "Fence Sitters"--Why buying and selling NOW matter! The dangers of increasing of interest rates!

by Eric Stark - Senior Mortgage Consultant


Waiting to buy a home between now and even a few months from now can cause a buyer to incur thousands and even tens of thousands dollars in additional interest on a loan over time.  While home prices are the highest they have been in years thanks to a rebounding economy, new buyers and sellers are losing a net benefit of this increase as a result of increasing interest rates.  For example, in early May, interest rates were as low as 3.25% on a 30 Year Fixed.  By the end of June, they were at 4.5%.  If you were borrowing a $300,000 mortgage, that would equate to the following loss in payment in interest:


May 2013


Mortgage:  $300,000

Principal and Interest$1,305.62

Interest Paid over 1 Year:  $9,750blog-rising-interest-rates


June 2013


Mortgage:  $300,000

Principal and Interest$1,520.06

Interest Paid over 1 Year:  $13,500


As you can see, the payment INCREASED by $215 a month.  That is the equivalent of losing $50,000 in purchasing power/loan amount.  That means that someone’s whose maximum sales price range of $300,000 can now only qualify for $250,000.  On top of that, they cost themselves over $3,750 in additional interest per year.  In 5 years, that’s almost an extra $20,000.  In 10 years, that close to $40,000.  So quite a lot over the life of a loan. 


Even if prices somehow go back down, let’s say by $20,000, but interest rates still increase even by half a percentage, you’re still losing money over the net sales gain in price on a home versus extra cost in rate.  So for example, see below:


June 2013

Rate 4.5%

Mortgage:  $300,000

Principal and Interest$1,520.06

Interest Paid over 1 Year:  $13,500



January 2014


Mortgage:  $280,000

Principal and Interest$1,503.10

Interest Paid over 1 Year:  $14,000


The payment might be slightly smaller on the principal and interest, but your interest over the life of the loan is more.  So you lose in the end even though you had a borrower less.  You still paid more.

What this shows us is that as rates climb, in order for buyers to purchase in the higher price point categories ($300,000 and more), sellers are going to have to reduce their costs to bring more offers in the mix.  On top of that though, when the seller goes to buy their new home, they are going to lose more out of their pocket because they are paying more interest over time.  So the time to sell is now while the market is good and rates can still afford a few more buyers in that price range.  Waiting for later can only cost sellers more in every part of the equation. 


 Eric Stark

Senior Mortgage Consultant

C: 770-231-1230

F: 678-264-1577

1000 Mansell Exchange West, Suite 270

Alpharetta, GA. 30022

Mortgage Application

NMLS# 450821  GA# 36837

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by Bruce Ailion

Low inventory and rising prices have created a situation where multiple offers in hot markets are increasingly common. When prices are rising and new listings are priced using 3-6 month old comparable sales, the new inventory is often underpriced.  Educated brokers and buyers understand this and quickly offer list or better.

Large investors and local investors, expecting prices to again reach their 2006 peak are buying everything in sight, perhaps creating a new speculative bubble.  This creates a challenge for buyers. In addition to the standard methods, buyers must employ outside the box strategies listed below to succeed in multiple offer situations.

The most critical step to succeed in multiple offer situations is to be an “All Cash” buyer presenting a proof of funds statement with your offer.  Many sellers are as concerned that the buyer will close as they are about the price.  If you do not have cash in the bank, show a fully approved loan subject only to appraisal.

If possible, evaluate the property’s condition and waive inspections prior to making your offer.  If the systems are old, the roof is old, or the siding is damaged, take that into account in your offering price.  Homes with unknown conditions, code violations, termite evidence, missing wiring or plumbing, mold, shifting walls or foundation problems or other red flags are valid reasons to avoid the home or negotiate an inspection period, but keep it short 3-5 days. Offer to provide the seller the inspection report.

Provide adequate earnest money in the form of certified funds.  Many offers will include $1,000 or $2,000 of earnest money so to strengthen your offer consider offering a 10% or 20% earnest money deposit.  Higher amounts of earnest money communicate to the seller your intention to close and financial strength.  If you decide not to purchase this property, you can always attempt to recover your earnest money through litigation.  This litigation would be to establish the earnest money was a penalty, not a reasonable approximation of the seller’s actual damages.  Most sellers will settle rather than hire an attorney to fight to retain the earnest money.

Present a clean contract; avoid too many contingencies for example: a spouse or partner’s approval, attorney’s approval, seller providing a warranty, a survey, or leaving or repairing certain items.  These items may make the difference to the seller saying no to your offer over another.

Do not request the seller pay closing costs.  Find an affordable attorney or title company to represent you.

When responding, provide everything in the form the seller requested.  Corporate sellers that have specific forms and specific timelines and requirements.  They will reject your offer if it is not completed in full and as instructed. Additionally, their agent may not even be required to present incomplete offers even if it is the highest.

Know the value of the home.  Make your best offer.  You may not have a second chance.  This may be well above list price.  Consider an Escalation Clause; if two offers are deemed to be equal state you are willing to increase your offer by X dollars to break a tie with an equal offer.  Often 1% of the purchase price is a guide especially if you are in love with the home, provided you are not willing to lose this home over 1%.

Permit your offer to be held as a back-up for 10, 15, 20 days.  It is not uncommon for the high bidder to make an irrational bid and not deliver earnest money or stop payment. The seller may accept a higher bid with an inspection, financing, or appraisal contingency that fails early on in the contractual period.  A seller might want or need a back-up buyer.  This is especially true if they went out and contracted non-contingent on a new home.

Offer to close quickly, 10 to 14 days for vacant homes.  Sellers are concerned about liability, theft, holding costs and hazards with a vacant home.   Offer to close at the seller’s convenience with occupied homes.  Be flexible if the seller needs to find a new home, provide them that time.

Have your Bruce Ailion is an experienced Realtor communicate with the seller’s agent to get as much information about the number of offers, range of offers, and time limits in a multiple offer situation.  Have your agent request to be present if the agent is presenting the offers in person.

Communicate your offer prior to the deadline but not too far prior.  Sometimes the listing agent will shop your offer seeking a slightly higher from a preferred client or agent or a competing agent in their office may see your offer.  CONFIRM THE OFFER WAS RECEIVED.

If possible try to meet the seller and make a positive personal impression, develop a warm relationship.  Meet the five nearest neighbors, make nice, and enlist them in promoting your offer and their desire to have you as their neighbor.  These people may be long-time friends and still in contact with the seller even if the seller has moved.  Let them know you plan to live in the home verses leasing it to a tenant.  If you plan to paint, landscape, improve, be active in the community, have children their ages, went to the same college, or share similar interests, don’t keep that a secret.  Develop an advocate.

Follow up persistently.   Sellers may take a while to respond but that shouldn’t mean you remain in the dark.  Ask for an answer either way.  I like to ask if my buyer was the highest so we can move on if we weren’t.  Then I ask if we were close.  If so, I communicate that the buyer and perhaps we make a higher offer.  Many sellers will consider higher offers even after the deadline. 

In hot markets the goal is to get any home at all without paying too much over today’s real market price.  Many markets, including mine, are seeing 5-10 offers the day a property hits the market, as many as 70-80 offers within a week for You can search the available properties on our website that are underpriced.  Some agents will purposely underprice new listings to draw multiple offers.

For an owner occupant or the small time investor offering more than the big players in a “best and final” round there may be harsh consequences.  They are essentially paying the future price today.  As we learned in the 2006, that price may not be higher than what we paid and may in fact be lower.

To summarize, a 62 year old couple was walking alone the beach shore.  They found a lantern and cleaned off the sand, a genie appeared and for releasing her granted the couple two wishes.  The wife said I wish I could take a first class two year cruise around the world.  Instantly two tickets appeared in her hand.  Then she asked honey what do you wish for?  He said I wish I had a wife 30 years younger than me, instant he was 92 years old.  As a final piece of advice when making best and final offers, be careful what you wish for, you might get it.

Atlanta is now one of the Hottest Markets in the US.  The window to buy at 1998 to 2002 prices is closing fast.

Bruce Ailion,  

RE/MAX Greater Atlanta

An Atlanta Real Estate Expert Serving Clients Since 1979


Certified Residential Specialist

Certified Real Estate Broker

Accredited Buyers Agent

MS Real Estate and Urban Affairs

Certified Distressed Property Expert

Certified Investment Agent Specialist

203K Certified Specialist


2050 Roswell Road

Marietta GA 30062

404-978-2281  Direct

404-386-3682  Assistant Robin

678-760-6266  Buyer’s Agent Adam

770-973-9700  Office



Bruce Ailion Quoted in CBS Money Watch article!

by Bruce Ailion
By  Constantine von Hoffman / MoneyWatch/ December 13, 2012, 6:45 AM

Investors fuel U.S. housing recovery

David McNew/Getty Images

(Moneywatch) Even as U.S. economic growth stutters, the housing market is showing real signs of a rebound: home prices are up, pending sales and constructing activity is rising, and the number of existing homes for sale continues to drop. The big question, amid slow job growth and stagnant personal income: Will it last?

If the housing upswing does continue, it will likely because of the trend's unique characteristics, with investors, more than consumers, sustaining momentum.

The indicators of a housing recovery are both plentiful and nationwide. According to the most recent Fiserv Case-Shiller data, the real estate market during the spring and summer this year was the strongest since the peak of the housing bubble in 2006. Other green shoots for housing:


  • Fiserv reports that average U.S. home prices have increased 1.2 percent since summer 2011
  • Home prices were up in more than one-half of the 384 metro area markets in the second quarter of 2012
  • Many of the biggest price increases have been in markets hardest hit by the housing crash, including Phoenix (14.5 percent), Detroit (11.6 percent) and Miami (6.9 percent)
  • Home prices in October rose 6.3 percent over a year ago, according to research fire CoreLogic
  • Pending sales of existing homes were up 5.2 percent in October, according to the National Association of Realtors
  • Overall housing inventory is down 22 percent year-over-year and probably at the lowest level since the early 2000s, according to

Despite the positive signals, analysts are tempering their enthusiasm, nothing that the recovery in housing is only relative to the calamity that befell the real estate sector during the financial crisis.

"Yes, the housing market is in a recovery," says Rick Sharga, executive vice president of Carrington Mortgage Holdings, a loan servicing firm. "All the metrics are pointing in the right direction -- pending sales, sales of new and existing homes, price appreciation, and housing starts. Delinquency and foreclosure rates are both trending down. But it's not an explosive, booming recovery. It's a recovery in the sense that it's better than the horrible numbers we've seen over the past few years."

What makes the upturn in housing unusual is that it is mostly being fueled not by consumers buying a first or even a second home, but by investors scooping up distressed You can search the available properties on our website. This is one result of the Federal Reserve keeping its prime interest rate so low. That drives down the cost of mortgages, but also makes it harder to get a good return on things like savings accounts and traditional investments like bonds. So hedge funds, private equity firms and other investors looking for a better return on their capital have moved aggressively this year to buy single- and multi-family homes.

"I am not seeing an increase in buyers," says Mike Orr, director of the Center for Real Estate Theory and Practice at Arizona State University's Carey School of Business. "I am seeing a reduction in supply as the primary cause of the recovery. Investors represent about one-third of buyers, owner-occupiers and second-home buyers are the other two-thirds. They are all competing for a smaller pool of homes for sale. In particular the pool of bargain bank-owned or short-sale homes is much smaller than last year."

Investors differ from ordinary home buyers in two notable ways: They can pay cash for You can search the available properties on our website and they buy in bulk. This is a major reason for the slowly rising home prices and diminishing housing stock.

"It's clear that the bulk sales to investors have reduced the property overhang in for-sale property, which is a positive," says Stuart Gabriel, director of UCLA's Ziman Center for Real Estate. "It's helped in absorbing that inventory, which has helped stabilize the market. It's obviously put a floor under prices."

Investors are also behind much of the new home construction because they are providing funds to regional homebuilders, which continue to have difficulty getting loans from banks. In both cases, they expect to earn income by renting the houses over the next five to seven years -- when they assume prices will be much higher -- and then to sell them when the housing market is strong. 

"We've got an environment where the availability of mortgages has never been tighter," says Rob Simmons, former chief financial officer of online brokerage E-Trade Financial. "This is creating opportunity for investors to come into market and provide a bridge until the jobs market and other things improve enough so that individual buyers can start buying again."

While the flood of investor money into housing has helped boost residential real estate across the nation, some people worry about the impact of so many absentee landlords in local markets.

Such investors "are not familiar with values, often do not view the property, and have little experience in the repair costs and management costs in the local market," says Bruce Ailion of RE/MAX Greater Atlanta. "In my market, private equity and hedge funds are driving up prices."

Yet given how far home prices have fallen since the bust -- roughly 30 percent from their 2006 peak -- few expect those costs to be the main barrier to sales anytime soon. For now, tightness in the credit markets remains the chief constraint on sales and prices, as lenders tighten standards for borrowers.

© 2012 CBS Interactive Inc.. All Rights Reserved.

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The Ailion Team
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2623 Sandy Plains Rd #202
Marietta GA 30066
Fax: 404-480-8448

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