Why Buy Now?

March 22, 2013

Real estate…. it’s been such a dirty word for the past few years. We were told that the housing bubble caused all of our economic problems and you couldn’t point enough fingers at bankers, federal regulators, appraisers, and yes, even we Realtors had our share of the blame.

Truth is, it happened. We survived it. Record foreclosures…. Years ago (16 to be exact) when I started in real estate you almost never heard of a foreclosure. Then all of the sudden, it was our life. Now we are faced with short sales, foreclosures and … my favorite… the traditional sale. It’s wonderful to engage in a transaction that closes with an actual, live Seller sitting at the closing table with the buyer!

I speak about the past few years in past-tense more for the sake of trying to get a historical perspective about it. We’re not completely out of the woods yet, but we’re on our way. The pace of sales and pricing is trending favorably, for a few months in a row, now. There is more confidence and optimism on behalf of buyers and sellers alike. Perhaps it’s because every time they turn on their tv, radio or computer, they aren’t being bombarded with negative messages about real estate!

It’s BEEN the perfect time to buy for a long time, now. Inventory was high, and mortgage interest rates have been so low for so long!

What I’ve noticed is that buyers fear the real estate transaction a little because of a lack of information about how loans work. While we seem to be wanting less, and want to save more, nobody is giving advice on how much of a down payment you need to buy a home.

The magic answer: 0-20% down or more. Obviously, the more money you have down the better as it will qualify you to avoid things like private mortgage insurance or lower interest rates. However, let’s say that you’re going to buy a foreclosure that’s already marked well under it’s fair market value for a quick sale, but it needs some tlc. Assuming it will pass inspection and other criteria, why not look into a USDA Rural Housing loan or FHA or WHEDA loan that will allow you to purchase with 0 to 3.5% down? More people qualify for these types of loans than you realize.

Here’s the secret to mortgage shopping: You HAVE to shop around! You have to know what’s out there because not every bank offers every type of loan. Ask questions. Don’t know where to start? Here are some sample questions that if I was buying a home the first time, I’d want to ask:

1) What types of loans do you offer to first-time homebuyers?

2) How much down payment do I need to purchase a home?

3) How long does it take to process my loan?

4) What are the best terms I can get for a loan (consider 15 yr mortgage vs 30 yr mortgage)?

5) What do I have to do to get pre-approved?

6) For how long is my pre-approval good?

7) What fees will I be charged for getting pre-approved?

8) What fees will I be charged for getting my loan through you?

9) What hours are you available? Will I get your cell phone number? What if I need to get in touch with you on nites or weekends?

Buyers, here’s what I’m seeing: Inventory is still about where it’s always been in terms of how many homes are on the market, but we are down slightly. This is the time of year when we traditionally list a lot of homes and add to the inventory. Homes that are priced well and are in good condition go fairly quickly. You MUST be pre-approved so that you know with confidence the offer you are making is going to stick, and that gives the seller confidence, as well. If they are comparing your offer with a pre-approval letter against another offer where they have no reassurance of the buyer’s financing, guess who they are going to favor?

Don’t play games: Watch the market and know what pricing is in your market; a buyer’s agent will help you with pricing. If you want to throw low-ball offers at everybody, even your agent will become discouraged and stop working with you. Not everybody is in distress and you have to know who you’re negotiating with and what you’re negotiating on. There is no magic rule: Make a fair offer and see what the seller does with it. Most sellers will counter a fair offer but reject a low-ball offer.

Remember that getting the offer accepted is just one part of the process; you have to get through a 30-60 day period in which you will have an inspection (with possibly more negotiation), loan approval and appraisal, at the very least. Create good will; the seller has probably already taken a hit on the equity in their home. If you need to negotiate an inspection issue, you want cooperation from the seller, and that is earned in the early negotiation of the offer.

Get yourself to a Home Buyer Seminar. Learn the ropes. Find a real estate agent that you trust and discuss Buyer Agency or Buyer Representation. Then let them guide you through this process. You won’t be sorry! And soon, you won’t be paying rent anymore!

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