Should I Buy Now or Later?

I was catching up on my real estate blogs today when I noticed the same question coming up again and again in posts on various forums. It seems that first-time buyers are facing a real conundrum right now: <h3>Buy now and claim the first-time homebuyer tax credit, or wait until the credit expires in a few months and then take the plunge? </h3> Competition among buyers has been surprisingly stiff in some submarkets, particularly with regard to foreclosures and lower-priced starter homes. Incentivized buyers competing for homes has driven prices up, or at least held them steady. We've certainly seen sustained gains in home prices in many areas, including the metro Atlanta area. The prevailing sentiment seems to be that waiting to buy later is a real gamble. Buyers fear that these upward trends will continue past the expiration of the tax credit, and as a result, they'll suffer the double-whammy of missing out on the credit and having to pay a higher price for a home. I predict that the exact opposite will happen. The tax credit has stimulated demand in the short term, with the overall effect of artificially inflated (or sustained) home prices. When the tax credit expires on April 30th, demand will taper off--perhaps sharply--and there will most likely be a lag period of a few months when prices stay elevated as demand drops. But eventually, sellers will respond to the decreased demand by lowering their asking prices (or at least by being more open to price reductions or hard negotiations). Another factor to consider are interest rates. Interest rates are being held down at present and hence are artificially low. When the tax credit expires, and once the Fed changes its strategy, interest rates are almost sure to rise. Higher interest rates mean that borrowing is more expensive, which translates to a higher monthly mortgage payment for most buyers. As a result, people might not be able to afford quite as much house as they currently can. Again, there might be a brief lag period, but eventually the market will respond to these shifts and prices will come down. The real question to ask is weather this tradeoff is worth it. In other words, will the eventual--and in my opinion, inevitable--drop in prices be drastic enough to offset the rising cost of a higher interest rate? This all depends on a buyer's specific situation (down payment, credit score, etc.), along with a bit of good luck in getting the timing right. But I can't help thinking that some buyers who wait might actually come out ahead when all is said and done.

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2010-02-24T17:00:45-05:00

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102 should-i-buy-now-later Should I Buy Now or Later?

2010-03-11T12:01:08-05:00

There is a huge backlog of foreclosed homes on the Atlanta real estate market right now, and experts predict that the number is only going to increase over the next year or so. The perception is that buying a foreclosure means getting a good deal, so buyers are flocking to purchase them in record numbers. In some submarkets, foreclosed properties make up the vast majority of home sales. Everyone wants a steal. The overabundance of cut-rate properties makes it pretty tough for properties that are priced at fair market value to stand out from the crowd. <div style="text-align: justify;"> If you're a traditional seller, how can you hope to compete in this environment? In most cases, you can't compete on price unless you're willing to take a loss. So what else can you do to attract more potential buyers away from the foreclosure frenzy and into a closing on your home? Here are some of the advantages that traditional sellers have that give them a competitive edge over all those foreclosures: <div> <div style="text-align: justify;"> <ul> <li> Documentation. Dealing with a seller who provides disclosures, maintenance logs, blueprints, and other relevant records really puts buyers at ease. Anything you can provide that helps them learn about the house's history will give them peace of mind, which can be worth a lot to buyers who don't like the uncertainty involved with buying foreclosures. Even if the disclosure includes something negative, buyers would often prefer to know rather than be surprised at a later date. One of the drawbacks of buying a foreclosure is that there usually aren't any such records to go by; sales are typically As-Is with no disclosures. Provide buyers with any relevant documentation to reassure them that there will be no surprises: What you see is what you get. </li> <li> Maintenance. In a traditional sale, the home is almost certain to be in better shape than a foreclosure. Foreclosures are almost always distressed in some way. Obviously, the foreclosure happened because the previous owner was financially strapped, so it's safe to assume that general maintenance has suffered and repairs have been neglected. In the worst cases, abandoned homes have been vandalized and plundered for appliances and copper pipe. In contrast, a traditional seller-occupied home has in most cases been reasonably maintained. A conventional contract lists all appliances and fixtures included in the sale, and sellers can answer questions about what kinds of maintenance has been done on the house and when (e.g., treating for termites, replacing the roof, etc.). Also, upgrades and remodels are likely to be of a higher quality than, say, a hastily flipped property that ended up in foreclosure. A well-maintained home appeals to risk-averse buyers, so play up this aspect of your situation to potential buyers.</li> <li> Simplicity. Traditional sales are usually straightforward processes. They are far less frustrating than trying to buy a foreclosure, which involves waiting on the bank to respond to an offer. Buyers who are pressed for time can't afford to wait around, so they are a good target demographic for traditional sellers to pursue. These days, competition to get a good deal is stiff, and foreclosed properties are increasingly sparking bidding wars, in which they eventually sell for far more than the initial listing price. The simplicity of a traditional sale will attract buyers that don't want the drama or frustration of scrambling to "win" a foreclosure. </li> <li> Leverage. It's a buyer's market, and buyers have lots of leverage with all the surplus housing inventory on the market right now. Buyers who like to bargain but don't want to get into a bidding war over a foreclosure will be attracted to properties with reasonable sellers. Traditional sellers who recognize this and are smart about pricing and negotiating will come out ahead in this foreclosure-saturated market. Your listing price needs to be competitive, and you should be ready and willing to negotiate with any buyer that presents an offer. </li> </ul> </div> </div> <div style="text-align: justify;">This is a tough market for traditional sellers, but there is hope. Emphasize these advantages and eventually you'll find the right buyer for your home.</div> </div>

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2010-02-22T12:01:04-05:00

Jennifer

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101 -there-hope-traditional-sellers Is There Hope For Traditional Sellers?

2010-03-11T12:01:07-05:00

Last week, the Federal Housing Administration (FHA) announced some <a href="http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016">new rules for FHA loans</a>: <ul> <li>The up-front mortgage insurance premium (MIP) will be raised to 2.25% (up from 1.75%) to help insulate the FHA against risky borrowers.</li> <li>Borrowers must now have a FICO score of 580 or above to qualify for the 3.5% down payment program. Higher-risk borrowers with scores lower than 580 will be required to put down a minimum 10% down payment.</li> <li>Seller concessions (now 6%) will be halved to 3% so as to create less incentive to inflate appraisal amounts.</li> </ul> Monitoring of FHA lenders and enforcement of standards together comprise a significant portion of the changes. The purpose of these policy changes is to help the FHA build up reserves while managing its risk. Sounds reasonable enough. But how will these rules affect the Atlanta real estate market? The restrictions might make it more difficult for lower-income buyers to qualify for FHA loans, translating to a slight decline in home sales in certain price brackets. Further, they may slow the absorption of the excess housing inventory, particularly with regard to distressed properties and foreclosures. However, most experts agree that the actual impact of these changes will be minimal and should not have any detrimental effects on housing's long-term recovery.

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2010-01-28T17:00:33-05:00

Jennifer

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100 listen-new-rules-fha-loans Listen Up! New Rules For FHA Loans

2010-03-11T12:01:07-05:00

Every home has flaws that sellers wish weren't there. Typically, real estate listings downplay these flaws or don't even mention them at all, in the hopes that buyers will overlook them or miss them altogether. But when life gives you lemons, why not make lemonade? The examples below illustrate how you can turn cons into pros when putting your Atlanta home on the market. Here's what to do if your house... Has no lawn - Lawns are important to buyers with children or rambunctious pets. But a home with little or no yard can really appeal to folks who don't want to spend much time doing landscaping chores. Market your lacking yard by emphasizing that no yard means no maintenance. Is stuck in the '70s - Assuming the price is right, houses that need updating can be attractive to bargain hunters looking to customize the updates to their own preferences. If you can't afford to do the upgrades yourself and must sell the house as-is (shag carpet, wood paneling, and all!), then tell buyers that the house is "ready for their finishing touches" and you may well pique the interest of these types of buyers. Is next to the interstate - Obviously, having a major street or highway as a next-door neighbor isn't going to be your strongest selling point. But you can feel justified in claiming that your house has easy highway access, which is sure to appeal to commuters in the traffic-heavy Atlanta metro area. Isn't in a good school district - The whole school district question, as crucial as it is to many buyers, might not even matter to some of your potential buyers, especially the ones without school-aged children. Even if your home is not in the most desirable school district, you can still play up other educational attributes; be sure to mention neighborhood charter schools as well as other desirable cultural features in the area such as museums and libraries.

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2010-01-27T18:00:31-05:00

Jennifer

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99 turning-cons-into-pros-when-listing-your-atlanta-home-sale Turning Cons Into Pros When Listing Your Atlanta Home For Sale

2010-03-11T12:01:07-05:00

* Disclaimer: I am not a mortgage broker, nor do I have financial expertise or credentials of any kind. This article was written from a layman's perspective (from one buyer to another) after undertaking careful research and numerous discussions with co-workers and acquaintances. In the face of the bursting of the housing bubble, new financial regulations, and a recession that won't quit, banks are tightening the purse strings on new home loans. Sure, interest rates are at an all-time low, but what good is that when buyers can't qualify for loans? It's definitely harder than it used to be, but not all hope is lost. Here are some things to keep in mind when embarking on the adventure of getting approved for a mortgage in tough times: <ul> <li style="text-align: justify;"> There's more at stake now than just your income and credit score. Additional factors, such as length of employment or extent of credit history may be considered. For example, folks who are self-employed may have difficulty qualifying for a loan, as might people who have recently started at a new job. Establishing a credit history is also crucial; responsible use of a credit card is one way to get the ball rolling here.</li> <li style="text-align: justify;"> Comparison shop for the best interest rates. Rates are at <a href="http://clickscape.com/real-estate/record-low-interest-rates">historic lows</a> right now, so it's a great time to buy. But don't assume that all banks offer more or less the same rate; shop around and you'll be surprised at how much it varies from institution to institution.</li> <li style="text-align: justify;"> Preapproval letters are key. The process is fairly straightforward, assuming you have all your income and credit ducks in a row. It doesn't take long, and it really expedites the buying process by making your offers more credible and hence more attractive to sellers.</li> <li style="text-align: justify;"> In general, banks want bigger down payments these days. However, there are still some options available for first-time homebuyers, including down payment assistance. Federal Housing Administration (FHA) loans are government-insured loans available through select lenders to buyers who qualify (usually lower-income or first-time buyers). These loans typically require a down payment of 3% (versus the standard 20% required to avoid paying private mortgage insurance (PMI) on your loan. And don't forget about the <a href="http://clickscape.com/real-estate/what-homebuyer-tax-credit-extension-means-atlanta-real-estate">homebuyer tax credit</a> that was recently expanded and extended through April 2010.</li> <li style="text-align: justify;"> Distressed properties may not qualify for a loan. The paradox here is that the market is brimming with foreclosures and distressed properties right now. If you decide to go after one of these properties, be aware that lending requirements are pretty strict. Some types of loans, including FHA loans, state that the home must be in "livable condition" in order to qualify for a mortgage; establishing this, however, can turn out to be a major headache and could require statements from multiple third parties (contractors, inspectors, et. al.). </li> <li style="text-align: justify;"> Look before you leap. Be aware and stay informed of all of the laws in place before asking for special conditions, like extra money for repairs.</li> <li style="text-align: justify;"> If at first you don't succeed, try, try, again. Meeting the lender's requirements isn't always possible. You may have to try a different lender--or keep pushing the one you're working with--in order to get results.</li> </ul> Here's a <a href="http://www.edmondsun.com/business/local_story_352165329.html">great article</a> that discusses in detail some of the main things you need to know.

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2009-12-22T13:00:30-05:00

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97 getting-approved-mortgage-tough-times Getting Approved For A Mortgage in Tough Times

2010-03-11T12:01:06-05:00