Listing Courtesy of JACK LINGO REHOBOTH
If you are a Delaware homeowner (or about to become one), you’ll be interested in the progression of your Dewey Beach home’s value over time. The market may fluctuate, but what doesn’t is your goal of seeing your property value go up — in other words, calculating its Return on Investment. In economic terms, evaluating the projected ROI tells you how much profit there would be if the home is sold at a later time.
There are two major methods of calculating real estate ROI. Both take cost and appreciation into account — but they come up with quite different answers!
The Cost Method gives a smaller ROI. Consider buying an area house for $100,000. Ubiquitous Zillow (the Internet giant) pegs the current annual appreciation rate for real estate in the U.S. at 6%. If our Dewey Beach market proves true to that projection, the example Dewey Beach home value would register $106,000 after the first year. If $2,000 were spent on repairs, that means a $4,000 profit would result, and the ROI for that one year would be $4,000 divided by $102,000: 3.9%. At that ROI, it would take roughly 26 (100 divided by 3.9) years to equal the cost of the home.
Sometimes called the “Out of Pocket” method, this calculation yields a higher ROI. Here, ROI is calculated based on the size of the down payment (assuming a mortgage is involved). Take the same example: the Dewey Beach home valued at $100,000. You won’t actually pay that whole amount — just the down payment (say, $20,000). To evaluate the ROI, the down payment is added to the repair costs ($20,000+$2,000) and that number is subtracted from the appreciated home value ($106,000-$22,000). The “equity” in this case is $84,000, so the ROI in that single year is $84,000/$106,000 = 79.2%. Although this sounds terrific, it isn’t too realistic…after all, the mortgage left is still owed: it may not be “out of pocket” because it hasn’t been actually paid yet, but the remaining liability is real.
If you have Delaware home value questions, I’m here to answer those and any other real estate-related needs. Want to discuss home values, ROI, or other property questions, call/text 302-228-7871 or email me, Russell Stucki, REALTOR ® of Beach Real Estate Market to provide detailed information on Delaware homes for sale, investment and commercial properties, luxury and waterfront homes, condos/townhomes, new construction, lots and land, farms and equestrian properties located in but not limited to Bethany, Bethel, Bridgeville, Dagsboro, Delmar, Ellendale, Fenwick Island, Frankford, Georgetown, Greenwood, Harbeson, Laurel, Lewes, Lincoln, Milford, Millsboro, Millville, Milton, Ocean View, Rehoboth Beach, Seaford, Selbyville, Delaware.
For Dewey Beach home shoppers who anticipate taking advantage of today’s low mortgage interest rates, the Consumer Financial Protection Bureau has a few words of interest. The CFPB thinks it has found a way for consumers to get the best home loan deals.
The way they recommend is to shop around.
Now, it may seem as if everybody in Dewey Beach would know that without needing the Consumer Financial Protection Bureau to clue them in, but the CFPB has evidence to the contrary. The last time they looked, nearly half of mortgage borrowers hadn’t shopped around before they signed up for their loan (47% of them, to be precise). That is rather surprising, since even an eighth of a percentage point difference in the interest rate works out to a lot more than spare change. Why more home buyers don’t compare mortgage deals may be due to a number of factors.
For one thing, anyone who has spent much time on the internet has had the unfortunate experience of being promised that they can “see today’s rate” with no strings attached, only to eventually discover (after entering a lot more information than seems relevant) that they will be contacted (phone number, please) by what is likely to be a high pressure salesman. You get the feeling that you may have shared too much information to web denizens you don’t really know.
Another reason might be concern about qualifying. If you’ve had credit rejections in the past, the good news that comes with receiving any offer might make some folks accept it out of sheer relief.
Yet another reason might be especially true in today’s Dewey Beach market. Especially if you have earlier familiarity with the much higher rates from previous eras, the first mortgage rate you hear may be so low that you are delighted to accept it. There is also the fact that if you are offered several options with different loan types, terms, and point-rate tradeoffs, the act of choosing between them can satisfy the natural inclination to shop around.
The CFPB would like to encourage more aggressive consumerist behavior. To accomplish that—to make everyone “feel comfortable shopping in the mortgage market”—their web site has various educational tools. Their staff produced a number of charts. The one that shows interest rates from 1990 to 2014 slopes delightfully downward. Less informative is another chart that shows how borrowers who feel “confidence in their knowledge of available interest rates” are almost twice as likely to shop around as those who say they are “unfamiliar with available interest rates.” That doesn’t seem to be much of a revelation—it’s like saying that learning to read price tags increases your ability to comparison shop…
For those who do expend the effort to do mortgage comparisons, there is also agreement that having a professional in your corner leads to the most satisfactory results. It’s another good reason why, on the way to acquiring your Dewey Beach dream home, giving me a call is an excellent idea! Call/Text me Russell Stucki at (302) 228-7871, email me at firstname.lastname@example.org, visit more listings at www.beachrealestatemarket.com.