Mortgage Rates: The Current State of Affairs
A mortgage can be a powerful tool for investors. It helps them buy a piece of real estate, usually a home, at a discount. That discount is the difference between the mortgage value and the selling price of the property. Investors who purchase properties at a discount are called discount buyers.
The mortgage is usually a lien on the property. That means the investor has a right to claim the property as collateral. That right allows the investor to pay for the purchase using the property as collateral.
That’s why this is such a powerful tool for investors.
But it’s also important to know how to successfully complete a mortgage sale. If you sell at a discount, you should understand the time and effort required to sell a property. Follow the steps below to successfully complete a mortgage sale.
What to Know Before a Mortgage Sale
- Pre-Qualify – In a seller’s market, this step can get skipped. In a buyer’s market, it’s essential.
- Get an Appraisal – This is a report that estimates the value of the property. If you don’t have an appraisal, you’re missing the majority of the steps required for a mortgage sale. The appraisal will essentially be your asking price. If you do this step last, then you’ll have to rent the house out. It’s best to wait until the home is already for sale.
- Put a Listing on MLS – The MLS is the most popular listing service in the United States. Listing your property on the MLS can attract a lot of potential buyers.
- Price Your Property Appropriately – The rule of thumb for selling a property at a discount is to price the property at a 30% discount from the current market value. If your property is $150,000, you should price it at $75,000. That’s the minimum price you’re allowed to sell the property for.
- Put the Home on the Market – If you’ve priced it at the correct amount, then you’ll likely have a lot of interest in your home. It’s up to you to show the interested buyers to complete a mortgage sale.
- Find an Agent – It’s a good idea to find an agent who can help you find buyers. When selling the property, you don’t have the time to handle that task.
- Sell One-by-One – Showing a house to potential buyers is time consuming and stressful. That’s why a mortgage sale is often done one-by-one.
Set Up an Appointment
After putting the home on the market and listing it with the MLS, you should set up an appointment with a potential buyer. You can do this through the MLS or through a real estate agent. Make sure you set up the appointment at least two weeks before the buyer is scheduled to view the house.
Have the Home Sold
You’ve done the pre-selling work and they’ve come to view the house. Now it’s time to have them sign a contract. You can have an agent help you with that. The contract is the legal document that defines the legal relationship between you and the buyer. In most cases, the contract will include the sale price and other terms of the sale. Once the contract is signed, you have to have the buyer sign a third-party review form. The third-party review is a form that the buyer signs that says the contract has been reviewed by an unbiased party. It’s a best practice to have the home inspected before a buyer enters into a contract.
Complete the Mortgage
After the buyer signs the contract and has had the home inspected, it’s time to complete the mortgage. The loan officer will let you know the loan details and process.
Final Steps
Now that the contract is signed and the mortgage is complete, you have to close on the sale. You’ll need to send the signed contract and loan documents to the lender. Ideally, you’ll have the closing scheduled for the same day the buyer signs the contract.
The lender will usually send a notice to the seller and buyer that the closing is scheduled for that day. When the closing happens, the mortgage will be recorded at the local county recorder’s office.
The mortgage market is very dynamic. Even though rates have dropped recently, they could rise again. The market could also go into a recession.
Conclusion
Mortgage rates are already at historic lows. That means the more risk you take, the lower the returns you’ll get. The best option for an investor is to find a property for a bargain price and hold on to it for the long term.