Real Estate Survival Guide–Top 10 List For Buyer’s and Seller’s In Today’s Market

Posted on July 10, 2008. Filed under: -- Real Estate Guide For Today's Market | Tags: , , , , , |


 

survival guide

 

 

 

by Molly Greaves

ARE YOU A HOME BUYER OR SELLER IN TODAY’S REAL ESTATE MARKET?

I thought this was important for you to know. MONEY did a “House Rules” article for those of you that areeither buying or selling in today’s market, since the real estate game has CHANGED. To WIN, you’ve got to learn the new rules. So here they are:

Summary and Points From June 2008 MONEY MAGAZINE

BUYERS

       1.  You cant time the bottom; you can pick a great house.

Face it, the house you buy today will likely be worth less next year. That gets some thinking about the bottom. Resist they say. It’s harder than you think, but this is the best buyers have had in 2 decades, with inventories up and mortgage rates low. Pace yourself, find a great place, and drive a hard bargain. Ignore the asker’s selling price and bid 10% below what comparable homes are selling for.

       2. One reason to buy now: Mortgage Rates.

Homes are plentiful, and will remain so, but financing will be getting more expensive. Yep. True, the Fed slashed interest rates, but FIXED mortgages don’t directly follow the Fed. They reflect the bond’s market expectations about inflation, which remains a concern. The 30-year, now at 6.1% will likely reach mid-6% by December and 7% in 2009.   Today a $250,000 loan would set you back $1,500 a month. At 7%, a $1,500 payment gets you only a $225,000 mortgage.

       3.  Another reason to buy: Rates on Big Mortgages. 

Mortgages in amounts higher than $417,000 usually run a 1/5 of a percentage point above conventional products. But investors are shunning jumbos, which they claim now average 7.2% and are unlikely to drop this year.

       4.  Don’t buy Cheap; buy good schools.

You probably know someone who got a great deal on a foreclosure, but don’t forget, that when you buy a house, you’re also buying into a neighborhood.

They say that foreclosures tend to be bunched in areas where residents and speculators alike took out exotic mortagages to get into homes they subsequently found they couldn’t afford. That’s not a recipe for stability. Prices & quality could both decline further.   They also add to also avoid developments that popped up in the past few years. They too are likely to have a lot of riskly loans and little equity. Instead, go for the areas with the highly rated schools. They generally fare better in downturns, and that pattern is holding today.

       5.  Make sure your agent has your interest at heart.

The real estate game has a built-in conflict of interest since the listing agent and your agent both get paid by the seller. And these days, more sellers are offering cash to buyer’s agents. So, make sure you’re not being steered to a house that’s better for your agent than for you.

SELLERS

 

1.     Get real about price.

Too many sellers set their price based on yesterday’s market. Big mistake. They say to have 3 area brokers prepare what’s called a comparable market analysis. It will list asking and selling prices of similar homes, as well as amenities and sizes. If there is little inventory in your price range, list for what others are asking for.  If there are a lot of homes like yours on the market , then look to generate buzz. Set an asking price 10% below what homes like yours have been selling for. That raises the odds of getting multiple offers. If your market is really frozen and you need to drop the price, make one large cut. No baby steps.

 

2.     Age your agent—especially if it’s you. 

Selling on your own in an unprecendented slowdown means you’ll have to work awfully hard marketing your home. If you aren’t prepared for that, hire a broker. Avoid newbies. You want an agent who has been through good times and bad and who also has a track record that you can verify with clients.

 

3.     Pimp your house, hire a home stager.

To sell today, you’ve got to glam up your home. A stager will help get rid of clutter (especially clutter you don’t see); rearrange furniture to create attractive focal points; repurpose underused rooms, turning, say, that makeshift bedroom in the basement into a rec room, and pick paint and curtains that make room seem spacious. A consultation could run $200. Completing the plan could cost $1,000 or more. It’s worth it. If you live in Austin, I can be your consultant if you’d like. I have experience doing this.

 

4.     Cash will make your home look even better.

Instead of offering a cruise or plasma, offer something that will make your home more affordable, such as paying part of the buyer’s closing costs. In the MLS description of your house that agents can see, let them know you’re offering a $1000 bounty or 4% commission to the one that brings in the purchase. It will mean more knocks on your door.

 

5.     Underwater? Learn to swim!

   About 1/3 of those that bought last year or in 2006 now have negative equity. If a job or family issues compels you to move, your options aren’t that great. But, here are a few. First, you may be able to pursuade your employer to make you whole on the loan. Second, if the rental market in your area is strong, you can become a landlord and wait out the stump. Third, sell for as much as you can and then raid your savings for the difference. Short sales, in which a bank agrees to take less than is owed and release you from your debt, is getting a lot of media these days. A bank will only usually consider one if you’re at risk for foreclosure. Even then, it may say “No, thanks.”

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