The Struggle of a Seller’s Market if You are Buying a Home
As has become the case in several areas throughout the United States, a competitive real estate market has emerged in Chicagoland. Residential real estate has continued to grow throughout the pandemic, in part because of extremely low mortgage rates, which promoted an upturn in the home sales market. The pandemic has generated a seller’s market, which is when demand for homes surpasses the supply of inventory.
Inventory shortages continue to make the home buying market aggressive as supply is incapable of keeping up with demand. Low inventory is still motivating housing prices to increase. Homes in the Chicago suburbs have received multiple showings, followed by multiple offers, cash offers, and even offers over the asking price.
The current market is difficult for both buyers and sellers. While there is an advantage to selling a home in the current market, unless another home is already purchased, sellers are fearful of selling for the apprehension of not finding another home. On the flip side, buyers are spending months searching for a home they can afford because the bidding competition is driving up home prices. The preferred areas to live that offer the best school districts, entertainment and offerings, also come with a higher price tag. Fortunately, there are some steps you can take to put yourself in the most advantageous position to be able to purchase your dream home when you find it, even if it’s a bit more expensive.
A first consideration is to look into a contract for deed or land installment contract option. This is a contract between a seller and a buyer in which the buyer agrees to pay the purchase price in monthly installments. The buyer moves in when the contract is signed. Once the purchase price is fully paid, the buyer gets the deed recorded in his or her name. If you have found such a situation, be sure to retain legal counsel to review the contract to ensure it meets the requirements under Illinois law.
Another option to keep in mind when searching for a home is to include properties that would offer extra space to rent. Depending on the area, it may be land, garage or living space. The rental income will afford you additional funds to use towards the mortgage, allowing you a larger budget to house hunt. Ideally, have an account of at least six months of rental income saved if you are left without a renter to cover expenses.
Attempt to save as large of a down payment as possible. The larger the down payment a buyer has saved to put towards a mortgage, the more of an advantage the buyer has. Saving for a down payment can be difficult, but even the smallest contributions can add up over time from a side job or small edits to the daily budget. This will allow the buyer to either have their original budget with better financing or increase their overall home buying budget. A third option requires a bit more patience but will allow for more buying power.
Before beginning your home buying journey, set up a time to speak to your Pan American Bank & Trust Relationship Executive to determine which loan would be best suited to your needs. Choosing the right loan can positively affect your buying potential, and having a pre-approval in hand will facilitate the home buying process. Once you have found your dream home and have an offer accepted, our Relationship Executive will work with you to finalize the closing process quickly and efficiently.
401(K) Rollover Options When Changing Jobs
Changing jobs periodically is the norm. An estimated 20% of Millennials move to a new position and switch companies per year. While adapting to the various changes that come with a new job, an important consideration is how to best handle an existing 401(k).
When leaving a job, there are four options of what can be done with an existing 401(k).
- Cash – Out
- Leaving the Account As-Is
- Roll Over to New Employer
- Roll Over to an Individual Retirement Account (IRA)
Cashing out is the least recommended option of the four choices.
The individual cashing-out is usually taxed and fined an early withdrawal fee. In addition, the savings growth on those funds begins from zero again if reinvested, losing potential gains.
The second option of leaving the existing 401(k) account with the previous plan company and doing nothing appears to be the simplest approach. However, you should investigate the fees associated with that account. Are the account fees higher or will they change after you separate from employment? Take into account that even a quarter of a percentage in fees can add up to $50,000 lost in retirement savings for someone contributing $10,000 per year over a lifetime. If you changed employment several times, numerous accounts might accrue. Keeping track of various accounts will be more complicated when strategizing for the future.
Rolling an existing 401(k) account to a new employer plan is another option. This helps you save more and adds up over time. In some cases, employer plans offer limited investment options and have differing fee structures. Generally, the advantage of an employer 401(k) is the employer contribution or match based on the percentage of the money you put into the 401(k) plan. However, rollover funds would not qualify as a match.
The fourth option, rolling over a current 401(k) into an Individual Retirement Account (IRA). This allows an individual the ability to choose from a variety of investments and fees/expense ratios. If your new employer doesn’t offer a retirement plan, pension or 401(k), an IRA might be an option for your primary retirement saving source. You can select from a Roth or a Traditional IRA. IRA accounts can be opened at banks and investment firms.
Regardless of your choice, saving will be beneficial.
Important Note: Nothing in this article constitutes investment, tax and/or financial advice. All investments have risks and may not be suitable for everyone. You should seek advice from an independent financial advisor. The mention of products, services, and business in this article does not constitute an endorsement or recommendation.