During the Real Estate Boom of a few years ago, we were constantly bewildered by the consumer’s fixation on the APR of a loan. Seasoned real estate professionals were constantly trying to educate our customers and clients on the fact that the overall interest rate was not the only factor to consider when getting a loan. Given what’s taken place in the last couple of years, with these incredibly low rate loans adjusting into the stratosphere, I wish that more people had taken the advice seriously.
Consumers now are making a similar mistake. This time, they are focusing solely on the price of real estate. Buyers are sitting on the sidelines waiting for the prices to fall, and those that are braving the market are ruthlessly low-bidding on properties that are well-priced just to see how desperate the owners are for a deal — while interest rates have begun to rise.
Those consumers who think that by focusing on the price of the property they are guaranteeing an affordable purchase need to think again. Most experts expect interest rates to continue to rise to the end of the year, and it does not take much interest rate movement to wipe out the perceived savings gained from lowballing a seller. Once again, real estate professionals have to educate their prospects on the dangers of waiting too long. Let’s hope we do a better job this time.
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