If you’re looking to buy a house in Tennessee, then it is important that you understand the process can be somewhat cumbersome. Once you’ve found a suitable property in your desired Tennessee neighborhood, you’ll then need to start thinking about obtaining financing.
The financial roadblocks do not stop there, as you’ll need to consider other related costs, such as property taxes and closing costs.
Although an experienced real estate agent will be able to guide you through the entire process, we would suggest reading our in-depth guide. We’ll cover all of the necessary factors that you need to consider when buying a house in Tennessee.
How to Find a Tennessee Buyer’s Agent
Before you start the home buying process, you should first find a reputable real estate agent that has extensive knowledge of the Tennessee housing market. As you’ll soon find out, you’ll likely encounter a range of twists and turns throughout the buying process. By using an experienced agent, you’ll stand the best chance possible of buying your dream home without encountering any hiccups along the way.
A local agent will also be useful in timing your purchase. Most housing markets in the U.S. go through seasonal fluctuations, so your agent will be able to ensure that you time this well.
Clever can connect you with a top-notch real estate agent that knows the Tennessee housing space well. In doing so, you’ll be able to take advantage of on-demand viewings. This is especially useful during peak buying season, as competition can be fierce.
Learn More: What Does a Real Estate Agent Do for a Buyer?
Tennessee Housing Market Forecast for 2019 — and Beyond
The strength of the Tennessee housing market is closely aligned with the U.S. average. While prices in the U.S. grew by an average of 6.6% last year, Tennessee performed slightly better at 7.5%. Forecasts project that median home values in Tennessee will increase by a further 4.4% next year. This means that Tennessee property prices will grow at a slightly faster rate than the 4.1% projected nationwide.
In terms of median home values, Tennessee currently averages $167,000. When one compares this to the national average of $226,700, homes in Tennessee are affordable to both low-income and first-time buyers. This also makes it a viable option for real estate investors that are looking for a combination of cost-effectiveness and long-term appreciation.
Although the Tennesse housing market is outperforming the national average by a smidgen, it is important to note that performance can vary on a regional basis. For example, home prices in Nashville are growing at a much slower rate compared to the state average of 7.5%. Although median home values are much higher at $266,000, prices grew by just 6% last year.
Homes in Johnson City grew at an even slower pace, with a 12 month increase of 4%. However, at the other end of the spectrum, homes in Knoxville grew at a remarkable 9.9% last year, with a 5.5% increase projected over the course of the next 12 months.
Ultimately, the Tennessee housing market should be assessed on a regional basis as opposed to just state-wide. When looking to evaluate the true value of a particular property, buyer’s agents will often generate a comparative market analysis (CMA).
Best Time of Year to Buy a Home in Tennessee
Although it is important to assess the Tennessee housing market on a regional basis, there are clear trends that exist state-wide. This will allow you as the buyer to time the market in your favor.
As is the case nationally, most buyers in Tennessee usually begin to start viewing properties in May. This trend continues throughout the summer months. Families are extra keen to finalize the deal well before the close of summer, as they want to be settled in their new home before the school year commences.
What this means for you is that you are competing against a higher number of buyers. This moves the market in favor of the seller, as they’ll be able to get a higher price for their property. On the other hand, as more sellers list their properties in the peak months, you’ll have a greater number of properties to choose from.
If your main objective is to minimize the amount you pay for your property, then your best bet is to begin the buying process in winter. Tennessee properties take just over eight additional days to sell in January, in comparison to the yearlong average.
This will give you more leeway when it comes to negotiating a better price. Tennessee homes typically sell for their lowest in February, with a 6.7% reduction against the year average.
These seasonal trends can vary depending on where you are looking to buy a house, so it’s best to allow an experienced Tennessee real estate agent to guide you through the process of timing.
Learn More: When Is the Best Time to Buy a House in Tennessee?
Calculate Your Property Taxes in Tennessee
Once you’ve found your dream home, the next step is to make some considerations regarding property taxes.
The amount that you pay is based on the assessed value of your property. Officials from your local county office will perform an assessment every four to six years. It is important to note that the assessed value is not equal to the market value of your property. In the state of Tennessee, this amounts to 25% of the market value, as determined by the county official.
For example, as Tennessee has a medium property price of $167,000, the average assessed home value would be $41,750.
Once the assessed home value has been determined by your local county, it is then calculated against the current property tax rate.
Each tax rate is expressed in "mills," which is represented as dollars per thousand of the assessed value. For example, if your mill rate is $2, and the assessed value of your property is $200,000, then your total property taxes will amount to $400 per year.
The specific mill rate that you will need to pay is determined by your local council. This can vary quite considerably depending on where you live. For example, in Knox County, the 2017 mill rate was $4.5838. Over in Davidson County, it was $3.155. If you're based in Memphis, then you'll pay a mill rate of $7.3814, which is more than double than those in Davidson County pay.
Property taxes can be a confusing matter for some, so its best to let your Tennessee real estate agent guide you through the process.
Learn More: How to Calculate Property Taxes
How Much Are Closing Costs for Home Buyers in Tennessee?
It is also important that you take into consideration closing costs. Buyers in Tennessee usually pay around 3% of the final sale price in closing costs, so you’ll need to make suitable provisions. This can include the fees associated with escrow charges, home inspections, homeowner insurance, real estate transfer tax, and underwriting fees.
Most of the costs associated with closing are required upfront, so these will need to be covered outside of your mortgage financing. However, if you’re eligible for a first-time or low-income home buyer program, some programs assist with closing costs.
Nevertheless, taking into account the Tennessee median home value of $167,000, you as the buyer should expect to pay approximately $5,010 in closing costs.
Fortunately for you, by using an experienced agent that knows the Tennesee housing market well, they’ll be able to breakdown all of the closing costs that you're likely to pay. You’ll also stand a much better chance of negotiating some of these costs with the seller.
Learn More: Who Pays Closing Costs on a House?
On-Demand Viewings With Clever!
If you’re about to start the Tenessee home buying process, then you should now be aware of the many financial roadblocks that you’ll likely to encounter. Whether its down payments, property taxes, or closing costs, it’s important that you have a firm grasp of what to expect.
By allowing Clever to connect you with a reputable real estate agent that has extensive knowledge of the Tennessee housing market, you’ll have access to on-demand viewings. If you’re looking to buy a house in the busy spring or summer months, then this will give you a much better chance of obtaining your dream home.