uExpress.com: Smart Moves by Ellen James Martin -- (02/22/2012) IMPROVING MARKET INCREASES OPPORTUNITIES

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IMPROVING MARKET INCREASES OPPORTUNITIES

02/22/2012

Two years ago, a young family had their hopes dashed for buying a spacious suburban house they loved. No lender would approve their mortgage. But after cleaning up their finances, a few days ago these first-time buyers jumped the hurdles to become proud owners of an even bigger place.

"They were shocked and thrilled at how much more house they could get than expected. They got a five-bedroom, multi-level home with a three-car garage and a sunken living room. Plus it's move-in ready," says Jacqueline Hoff, the couple's real estate broker.

Why are many first-time buyers faring better than a couple of years ago? Hoff cites several factors. More home sellers are realistic on pricing and willing to bargain. Mortgage rates have slid to near-record lows. And many wannabe buyers have bettered their balance sheets.

For instance, the family paid off their student loans and wiped out a big car-related debt. They also cut expenses, saving enough cash for a down payment on an FHA mortgage. Their improved financial picture made them more appealing to lenders.

"More buyers are getting back to basics because they know there are amazing opportunities out there," says Hoff, who's affiliated with the Council of Residential Specialists (www.crs.com).

Still, she says most first-time purchasers now refuse to max out on a mortgage.

"People are cautiously optimistic about the economy improving. But they don't want to be house-poor. Families want to have money to go to the zoo, buy presents at holidays and to have nice dinners out," she says.

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"Young buyers especially don't want to over-extend themselves on a house. They've seen too many people in the older generation lose their properties to foreclosure and refuse to let it happen to them," says Merrill Ottwein, who heads a realty firm that works solely with buyers.

Ottwein says first-time purchasers with stable jobs are gradually feeling more positive about real estate.

Despite the encouraging signs, Ottwein, a past president of the National Association of Exclusive Buyer Agents (www.naeba.org), urges that buyers take special care when selecting a home.

"People no longer count on appreciation to bail them out if they make a mistake and pay too much or buy the wrong house," Ottwein says.

Are you seeking to buy your first home? If so, these pointers could prove helpful:

Make your first step a visit to the mortgage lender's office.

Though the real estate market is slowly strengthening in many areas, mortgage-lending standards remain stringent. That makes it especially important that would-be buyers make their first stop the office of a reputable lender. There they can obtain mortgage "pre-approval," meaning the lender will verify that they have the wherewithal to buy and define their borrowing capacity.

"In this market, mortgage pre-approval is imperative if you want the best possible deal. In the seller's eyes, pre-approval gives you credibility," Ottwein says.

Shop for housing in the strongest neighborhoods you can afford.

Due to lower home prices, Ottwein says more prime neighborhoods are now within the reach of first-time buyers.

"Look for a very viable neighborhood with strong schools and homogenously good upkeep -- not one where many homes have fallen into disrepair and are going through foreclosure," he says.

Some first-time buyers who for years have rented a small apartment are wowed into purchasing a large home in a second-tier neighborhood that's offered at a very low price. But no matter how cheap its price tag, Ottwein urges buyers to pass up any home in a weak neighborhood.

But how can you identify a second-tier community?

"One sure sign is that the pace of home sales is slow. To check the pace, ask your agent for data covering 'days on market' for all the properties that have sold in the last six months. As a rule, the longer it takes for average properties to sell, the weaker the neighborhood," Ottwein says.

Avoid buying in an area that's developing problems.

Ottwein urges buyers to pass on any neighborhood that's located very close to a major roadway or has a lot of through traffic.

He also advises buyers against locating in a community bordered by industrial or commercial buildings that are in decline. For example, you wouldn't want to live near a shopping strip with many shuttered stores.

In addition, Ottwein says buyers be wary of neighborhoods adjacent to tracts of undeveloped land, which could be turned into congestion-causing big box stores or other unpleasant entities.

"The only kind of vacant land you want to live near is a nature preserve or publicly owned land that can never be developed," he says.

Focus on the best available home within your preferred community.

Once you've found the best neighborhood in your price range, it's time to identify the ideal home there.

"You want a place that meets your lifestyle needs now but down the line also offers good resale potential," Ottwein says.

Buying with future resale in mind isn't necessarily about choosing the most luxurious home in a neighborhood.

Any home you buy in a family neighborhood should meet several minimum requirements, assuming you can afford them, according to Ottwein. It should have a floor plan that flows, at least three bedrooms and a garage suitable for one or two cars.

What features can you sacrifice to break into a strong neighborhood?

Ottwein says you can feel comfortable trading off a formal living room, a two-story foyer at the entrance or a swimming pool. Also, feel free to let go of the need for an extra-large yard or high-end appliances in the kitchen.

Homes that need extensive and costly renovation work -- so-called "fixers" -- are often a false bargain even if the price is low, he says. But well-priced properties that require only minor upgrades -- like fresh paint and new kitchen tile -- can save their buyers a bundle.

"The key for buyers is to distinguish between a house with little problems that are fixable for a small sum and a house with big problems that would cost a fortune to fix," Ottwein says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)