Rate cut great news for home sellers

The latest interest rate cut is very good news for homeowners currently trying to sell their properties – if they strike while the iron’s hot.

So says Aida CEO Young Carr, who notes: “Home sellers should definitely not regard this rate cut as a signal to raise their asking prices. What they should rather do with some urgency is talk to their agent about the great opportunity it presents to make their home more saleable.

“In the first place, any rate cut causes a revival of interest among prospective homebuyers and investors. This means an increase in the number of potential buyers for any property, so sellers must ensure that their property quickly gets ‘out there’ where it can be seen by these buyers - that it is well-advertised and on show as soon and as often as possible.

“Secondly, if they are serious sellers, they need to work with their agent to make sure that their asking price is really competitive, and be willing to negotiate with serious buyers. Indeed, they need to try to see the prospective purchase from the buyer’s point of view and try to find ways to make the deal as attractive as possible.”

Carr says that although a 0,5% cut is not that large, it could make all the difference for someone who has been waiting to get into the property market for the first time or someone looking to buy an investment property, especially when added to all the other rate cuts made since December 2008.

“The prime rate has been cut by a total of 6% since then, which has made a huge difference to affordability. On a 20-year home loan of R500 000, for example, the minimum monthly repayment at the new prime rate of 9,5% is R4661, compared to R6769 at the prime rate of 15,5% two years ago.

“What is more, and perhaps even more importantly, the latest rate cut means significant reductions in the household incomes needed to meet the banks’ qualification criteria for home loans. On a loan of 1m, for example, the reduction is around R1200 a month.”

And home sellers, he says, need to make sure their agents understand these positive financial changes and can present them to prospective buyers at the same time as they are showing them the attractive features of the property. “The prime consideration in home buying these days is affordability, so that is what both sellers and their agents need to address first.”

Article by: www.aida.co.za