WHY IT MAKES SENSE TO BUY NOW

Many buyers are “sitting on the fence.” They don’t know whether there will be a “double dip” in the economy. They feel they missed out on the tax credit incentive etc. While these and other issues, like job uncertainty are keeping many away from making the commitment, there are also excellent and unprecedented reasons to buy now.

Sellers too, have been hesitating, concerned that they won’t receive a “reasonable price” for their homes. They seem to want to wait until prices have come back to pre-bubble bursting times. There is a belief (wish, desire) that things will recover and do so pretty soon. Not only that, many aren’t considering the fact that while their home will rise in price, sometime in the future, so too will the property they want to buy, as well as the cost of their mortgage (when rates rise as well.) Consequently, there are excellent reasons for some sellers to market their homes now as well.

As reported by the LA Times below, interest rates are the lowest they have been in the 39 years Fannie Mae has been tracking these rates.

Prices as most are aware, are back where they were 5-7 years ago and have either stabilized or begun to inch up. With the “affordability index” at its highest point in over 10 years, there are more potential buyers available.

It takes a simple math calculation to document to people how much they will save by buying now @ 4.5% then waiting a year or two when interest rates move up to and over 6%. It will make it even more expensive if property values increase a slight 3% over the next few years.

Below the link to the LA Times article is a link to the mortgage calculator I used in my example.

http://latimesblogs.latimes.com/money_co/2010/07/30year-mortgage-rate-edges-down-to-new-record-low.html

http://www.mortgagecalculator.org/

SAMPLE COMPARISON – BUY NOW @ CURRENT PRICES - BUY LATER (3% appreciation)

Sales Price today $600,000 $618,000

Loan Amount (20% DP) 480,000 494,400

Interest rate (4.5% current) 6.5% projected

Payment (30 year) $2,432.09 $3,124.74

Total interest paid $395,552.22 $630,579.95

TEN WAYS TO SAVE THOUSANDS WHEN BUYING OR SELLING REAL ESTATE

It is always a good time to save money.

It is particularly so when real estate investments seem more uncertain. The following suggestions have something to do with the current market, but many are good ideas in any market.

NEGOTIATE

Until this recent market correction, most sellers thought that buyers couldn't pay enough for their cute little home. Tens of thousands of dollars over asking was only good if it beat out what the neighbor got for their house.

Similarly, buyers and their agents, were used to being turned upside down until the last dime dropped out of their 401k.

NO MORE.

Today, it makes sense to negotiate.

If you are not involved in the insanity of trying to buy an REO, you will have more of an opportunity to buy in the "real world" rather then the alternate universe that the following Youtube video comically and accurately describes.

http://www.youtube.com/watch?v=SM7oWKgCVo4

Negotiation doesn't mean making an offer so low that no one will consider it. Nor does it mean, staying firm until the buyer meets your price. This is the opposite of negotiation.

SELLERS
#1 - Price it right

The best thing you can do in this market is to price your home realistically. There is lots of inventory. Pricing your home high just makes it easier for your competition to sell their homes, when there is more inventory then buyers. (One of the saddest experiences I've seen in this business has to do with a seller following the market down, when they could have sold their home for tens of thousands of dollars more, had they only been realistic in the first place.)

#2 Keep the negotiations alive
When an offer comes in on your home, it might be much lower then you want. Don't make the common mistake of refusing to respond. A personal sense of outrage may be a good way to vent your displeasure but it's not going to get your home sold.

Take a good look at the offer. Is there a substantial down payment? Is the buyer pre-approved for his loan? Are the other terms, days until closing etc. acceptable to you? If the answers are yes, then it may be an offer you can work with. Don't you owe it to yourself to find out?

The way to find out is to ask questions of the buyers agent during the presentation. Why are they buying now? Why here? When do they have to do this by?
Information is power!
The more you know about the other party's circumstances the better position you are in. Once you know all you can, create a counter offer.

Is there anything in their offer that you can give in to? appliances? date of close of escrow? First come together on those points that are easy to resolve.

As for the price, if your home has been sitting for some time without an offer, come off your price. There is no need to go right to the bottom line. There is a need to keep the negotiations alive. The counter offer has to imply hope if you want to get a response from the buyer.

Many say negotiation is like fishing. You need to play the "fish" until you can reel him in. Of course, the buyer will, if they're any good, be trying to do the same.

(I'll continue with my list in my next several posts.)