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Summary: While the cold of winter inhibits people from shopping for a new house, it is actually a very profitable time to buy. In addition to fewer buyers and more motivated sellers, this slow season for moving real estate allows all of the parties and vendors involved in a sale more time to focus on the transactions that do come along. This shortens the span between offer and settlement. Closing in early winter may also yield tax benefits.
It just makes no sense. Among the holidays, inclement weather and the kids still in school, what good reason is there to look for a new house during the winter? Surely spring and summer are the optimal seasons to go house hunting. Except that they are not. Here is why.
The fact is that all prospective buyers ask themselves those very same questions. In most cases, the answer is to stay put and look out for the groundhog. This is why between a third and half of existing home sales occur during warm-weather months while under six percent happen in the first two months of the year. Not only do frigid temperatures inhibit outings to look over properties, but the pace of life is also busier at this time: businesses launch sales and marketing efforts; school sports like wrestling and basketball are in full swing; taxes have to get done…the list goes on.
Even the old adversary of seasonal affective disorder (SAD) takes its toll. While it may not be a debilitating condition, it often invites delay and procrastination. Taken together, these factors knock out a good many rivals from contending for the optimal residence.
Wintertime means a drop in inventory relative to the housing market. On the face of it, that should benefit the seller — and it often does. Just as frequently, however, the seller is feeling the need to be rid of a property. Home Sellers know that fewer people look in cold weather and thus wait to put the house on the market until things thaw out. Therein lies the rub: some can not wait that long. This urgency signals high motivation on a seller’s part, an incentive that can redound to the buyer’s benefit. Reasons are many and diverse: the death of the breadwinner, cash-flow interruptions or a new job opportunity that will not wait. Whatever the impetus, the owner is compelled to be more flexible in asking price, repairs and other terms of the transaction. Such willingness to concede may not be evident come Memorial Day.
With only a small fraction of purchasers on the prowl during the cold, dark days of winter, the entire chain of real estate conveyance is unburdened from a glut of sales clogging the pipeline when the days are longer. Realtors have more time for each client, as do lawyers, title companies, appraisers and home inspectors. Banks and finance companies are likewise unencumbered by hoards of applicants and borrowers. During this slower season in the business, the process from contract negotiation to settlement moves more rapidly. All of the personnel involved have more time to serve fewer buyers and sellers. Of the many variables that contribute to closing delays, for example, inadequate hazard insurance ranks among the top. A request to revise and amend the policy can be handled in minutes in January. In June, it would go into a slush pile of requests, waiting its turn for hours, if not days.
Yes, summer heat poses challenges to a house, especially one with little to no shade. Still, the frigid bite of winter exposes weaknesses — and strengths — like no other season. Pipes crack, gutters get dammed with ice and furnaces fail when insufficiently maintained. Heat can escape from vents, chimneys and attic hatches, as well as through poorly sealed doors and windows. Melting snow can penetrate through old roofing. Discerning lookers may ask to see the fireplace in action to confirm it is properly swept, an expense the seller should pick up. The point is that a house must defend itself in winter more than any other time of year. Viewing homes during this time, then, helps shoppers determine how well a structure weathers the, well, weather. The bitter chill and howling wind are your allies.
The same principle governing the sale and financing of a new house applies to moving as well. Winter is well outside of the busy season for movers. With less time pressure per trip, movers have more flexibility in terms of scheduling their services. No negotiating with landlords or new owners over a few more days of the tenancy until the moving vans can arrive. They are more certain to accommodate their customers when they do not have so many of them. Better still, their flexibility can also extend to the pricing since discounts abound when the days are short. If that is not enough incentive, consider the integrity of your possessions. The trailer of a moving van is like cold storage in winter; in summer, they range from sauna to pizza oven. Most items do much better in cooler temperatures than in an oppressively hot trailer.
Early winter closings help home buyers in that they can deduct mortgage interest charged upfront as points. Depending on each borrower’s loan and financial condition, points paid at settlement can reduce the monthly interest that comprises each loan payment. Since mortgage interest is deductible By Internal Revenue Service rules, discount points, i.e. prepaid interest, is also written off for those who itemize. Best of all, since this interest is paid at closing, buyers can itemize it on their returns for the year they close as opposed to waiting a full year. True, points are an expense people would rather avoid. Yet for those who close by December 31st, the sting of them is lessened when they lower your annual remittance to the federal government.
To maximize the advantages of buying a house during the winter, buyers are well advised to have their financing lined up sooner rather than later. Getting the best rate relative to cash flow and obtaining the most money for the optimal property requires consultation with expert loan officers who know the region and the understanding that every borrower comes from a different financial situation. Winter is young but it gets old fast. Sammamish Mortgage is a family-owned mortgage company based in the Pacific Northwest. We’ve been offering high-quality mortgage loans to buyers in WA, OR, ID, and CO for over 25 years. If you’d like more information, contact us today. You can also View Rates, or click to get an Instant Rate Quote. Or, you can initiate the application process and Apply Now using our automated online system.
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