When it’s so cold outside that fire hoses freeze while putting out a fire, you know that this time of year real estate sales are, well, glacial. It doesn’t matter if your seller lives in Hinsdale, Naperville or Lincoln Park, sometimes it’s…just…slow in the dead of winter.
But you still tell your buyers that it’s time to buy, right? You don’t have clients that you suggest they wait on the sidelines until it gets past 50 degrees outside, do you? Of course not. But have you talked to your clients about the power or interest rates?
Consumers have heard about historic low rates for over a year now. They’ve heard it so often it’s no longer news. But rates will be on the rise soon. Telling your clients that rates are at record lows or they’ll eventually go up, is informative but it doesn’t hit home unless you spell it out for them.
How so? A couple years ago when rates were around 5.375 percent, someone making $50,000 per year might qualify to borrow about $230,000. By putting 20 percent down, that’s a final sales price of $290,000. Right now, just about twenty-four months later, interest rates are closer to 3.25 percent. That same buyer making $60,000 per year can qualify for $300,000 loan for a unit selling for $375,000.
Find two listings in say, Evanston, one at $375,000 and one at $290,000 and show them to your clients. Now ask them which they’d like to buy. The answer is obvious but that’s the power of today’s interest rates. Using the very same qualifying income a buyer increases their buying power by one-third only because interest rates are so low.
So forget about taking advantage of low interest rates; your clients are numb to that by now. Instead, visually show them what it means. And remind them that rates need only go back up to where they were 24 months ago to force them into a smaller, less desirable place.
Forget the cold. Warm up the car and put on that new heavy coat. Buy now. Don’t wait.