10 Things a Buyer MUST Know (Part 2 of 2)
6. Don't try timing the market. We know what the market is like today, but can only give an educated guess what it will be in the future. There are so many variables that go into home prices and interest rates that no one can give you a definitive answer as to what will happen in the future. Sure, you can make predictions based on information but there is really no way to know. Many buyers decide that the home prices will continue to go down and that they should wait to buy. This can certainly happen and maybe that's a risk worth taking. But thinking too narrowly can cause disappointment and frustration later.
For example, if the recent Housing and Economic Recovery Act of 2008 helps reduce the number of foreclosures and short sales, isn't it possible that the number of homes available will be reduced, directly changing the supply of housing? Further, even if home prices go down more but interest rates go up, you will have less buying power. The amount you will pay in interest may not be worth the amount you believe you saved by waiting for the prices to go down.
7. Work with one agent. If you can't commit to working with one agent, you will lose the benefit of having that one agent help you find the best home based on the relationship that is built. Trying to work with several agents wastes everyone's time and usually backfires because you don't always get the best possible service. If you need to change agents, be sure to communicate this with your current agent to see if any issue can be worked out.
8. Understand short sales and bank-owned sales. Get an understanding of what it means to put in an offer on a bank-owned home or a short sale. Both sales can be very different from a "regular" sale. Short sales occur when a homeowner owes more to a bank than what they can sell the home for. They have to have the bank approve any sale because the bank will end up losing money rightfully owed to it. This process can take a very long time. Even getting a response from the bank can take several weeks.
During this time you may lose the opportunity to move forward on other homes, or you may spend weeks waiting for an answer only to have another buyer come in with a better offer that the bank wants to work with. Either way short sales can be disappointing and time consuming and you need to be educated so you know what to expect. Buying a bank owned home can also be frustrating. Signatures on documents are very slow to be returned by the bank and most banks have a "take it or leave it" attitude with terms of the sale.
9. There's no magic formula for offering the proper amount for a home. I can't tell you the number of buyers who tell me that you ALWAYS offer a certain percentage below the asking price. This kind of thinking can only lead to frustration and doesn't really help you. List prices on homes can be below, at, or above market value. Understanding home prices and the market in the area you are interested in is imperative in knowing whether a home is priced well.
Often I have a buyer who doesn't review the information provided and insists on offering, for example, 10% below asking price. This may work if a home is already overpriced but if it's not you may not be successful. For example, I am seeing more and more bank owned homes being priced substantially below market value. Of course this produces a frenzy of multiple offers and the home sells for more than if it had been priced at or above market value. If you don't understand how pricing works and have a rigid rule in coming up with a price you will probably be extremely disappointed after losing several homes to realistic buyers.
10. Don't forget that owning a home costs money. As a renter you are used to calling your landlord when the home needs something fixed. You pay your monthly rent, and costs associated with maintaining a home are not your responsibility. When you own your own home you have costs that you never had before. Regular maintainance, necessary repairs, certain utilities, property taxes, insurance, home owner association fees, and home improvements, will all now be your responsibility. Once you own your own home, you must keep enough money available to cover these costs.
There are great opportunities for buyers. Understandng these 10 key points will help you become a smart buyer and to find the greatest home opportunities that meet your needs.