These days, wannabe homebuyers fall into two groups. One is spurred to action by dazzlingly low mortgage rates. The other is equally motivated but hesitant on timing, given indicators that could signal a worsening economy.
For undecided buyers, Kevin Simrin, the broker-owner of six realty offices in Oregon, offers sage advice.
“If now is the right time for you and your family to buy a first home or to step up to a better one, don’t let fear stop you. But be sure to use data and not emotion to avoid overpaying,” says Simrin, who’s sold homes since 1989.
Before committing to purchase any property, Simrin urges buyers to review data on comparable sales for similar homes in the same neighborhood that have closed within the last six or fewer months.
He’s also a big advocate for making any offer contingent on a thorough home inspection, which could allow you to back out of the deal should your inspector discover major issues that would be expensive to remedy. These could include significant plumbing, electrical or foundation problems.
“A really solid whole-house inspection can cost as much as $400 to $600. But it’s worth it because of all the protection it gives you,” he says.
Here are a few pointers for buyers:
-- Search for a neighborhood with positive appreciation potential.
To locate the parts of your metro area that have the best prospects for future home appreciation, Eric Tyson, a personal finance expert and author of "Home Buying for Dummies," suggests you start with a regional map. On this, pinpoint major employers, such as corporate headquarters and military bases, where jobs are expanding. Locate communities with top public schools. Also, identify areas served by popular public transit lines, including new light rail systems that cater to traffic-weary commuters.
“Meaningful local information, which you can find on the web, helps you ... spot neighborhoods where home prices should rise rather than fall in the years ahead,” he says.
-- Attempt to track the direction of your local market.
Comparable sales data won’t give you the whole story on property values. You also need statistics on the direction of the neighborhood market, whether prices are heading up, down or sideways.
Tyson recommends you ask your agent to give you statistics on the median price of a home sold in the past month versus the prior month. Also ask for median price comparisons on an annual and yearly basis. These statistics should give you a good feel for the trend. Then use these data when crafting a bid for a property you like.
Also, Tyson recommends you seek out a highly motivated seller.
“Despite strong demand for property in hot metro areas, it’s still possible to find sellers who have an urgent need to move, perhaps due to a job change, a medical reversal or some other imperative,” he says.
-- Factor in your “personal economy” before deciding what to buy.
Would buying a well-priced home in a strong neighborhood be a good financial bet for your household if your monthly mortgage payments are more than you can afford? Absolutely not, Tyson says.
Prevailing standards for mortgage approval remain rigorous. Yet it’s still possible for many buyers to qualify for a larger mortgage than their finances warrant, thereby placing them at risk of a future default. That’s because your lender doesn't have the full picture of your financial obligations and spending habits.
Before committing to any purchase, even to a small home bought at a bargain price, it’s always wise to review your budget and assess your level of employment security. Is your current job at risk? Do you have easily marketable skills that would allow you to quickly get another job if you had to?
“You probably have lots of job stability if you’re in a prime health care field. If you’re a doctor or registered nurse who loses one job, you’ll undoubtedly find another one quickly. But the picture is very different for people in many other fields, like retail sales,” Tyson says.
-- Don’t rush into a purchase under pressure.
Even today, there are neighborhoods where buyers were locked in fierce competition over available homes. Some properties are still selling just hours after going on the market. These are areas where offers are written hurriedly, perhaps on the hood of a car. In these select areas, it’s still common for sellers to receive multiple bids from buyers offering more than the asking price.
But in most places, buyers are gradually gaining bargaining power. And that spells opportunity.
“Impulse can be the enemy of an unenlightened homebuyer. Sure, you want to be competitive for a property you truly love. But always keep your hand on your wallet when you do,” Tyson says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)