Selling Your D.C. House? Don't Expect Cash Offer
The high price of D.C. real estate is keeping one figure low — the number of all-cash sales.
Washington hasn't been a hotspot for bargain-hunting investors during the last dozen years. Those investors are often the ones with cash on-hand to buy.
Real estate firm CoreLogic Inc. says cash sales accounted for only 16.2 percent of all sales in the region in September, compared with an average 34.8 percent nationwide.
That makes the D.C. area the lowest among all major U.S. cities.
D.C. not for bargain shoppers
All-cash sales are low in Washington for a couple of reasons. CoreLogic senior economist Molly Boesel tells The Washington Business Journal that the area has a low level of distressed sales, and distressed sales have a higher share of cash buyers.
Nationwide, all-cash transactions have been falling steadily since peaking at 46.4 percent of all sales in early 2011.
Among the 100 largest U.S. cities, Miami had the highest share of all-cash sales in September, at 56.2 percent.
If you can’t pluck down all cash, then chances are you're working with a local real estate agent and looking at your purchase as a place to live, rather than strictly an investment.
That’s the case with most home buyers and leaves you with the option to pursue a mortgage.
How to cut mortgage interest costs
You can’t avoid the interest payments, but there are ways to pay less than calculated at the time of closing.
Consider choosing a biweekly mortgage payment plan to accelerate the loan payment. With a biweekly mortgage plan, borrowers pay every two weeks.
The 26-payment schedule is equivalent to paying out 13 months of loan payments each year. Some mortgage loan agreements may not allow this, but it can make financial sense for those who can afford do it.
Make sure you're not paying an additional fee for this option, as it reduces the financial incentive. If there is a fee involved, review your online payment options. Many loan providers offer homeowners an option to increase the principal of each payment.
A local mortgage professional should be able to easily calculate the cost savings benefit on a spreadsheet or loan calculator.
If you can calculate the additional cost yourself, increasing principal on existing payments can serve as a biweekly solution when a free one isn't available.
By making biweekly payments, you can save significant amounts of money in interest over the life of a loan. However, with interest rates currently low, the option may be less appealing, depending on your specific loan.