Smart Moves by Ellen James Martin

BUYING TIPS FOR A SHIFTING MARKET

He's a newly minted Ph.D. who recently landed a solid teaching job at a major university in a city he loves. He's ready to settle down and buy a condo. But after months of looking at real estate, he's still torn. Is now the time to buy?

On the one hand, he's swayed by the breathtakingly low-cost mortgage rates currently available to buyers. And home prices are still within his range of affordability. Indeed, he worries that recently rising prices could mean it's already a tad late to enter the market.

On the other hand, our teacher fears that real estate markets have yet to fully stabilize. True, home values in major cities have risen sharply in recent months. But the other economic measures, including the unemployment rate, paint a darker picture. Meanwhile, family members, including those who've lost equity in their homes, are urging him to be cautious.

This true story illustrates the still pervasive ambivalence affecting would-be homebuyers in the face of mixed signals about the direction of the housing market, says Michael Crowley, a veteran real estate broker.

"Given human nature, people wonder if there's a catch to all these good prices," says Crowley, the immediate past president of the National Association of Exclusive Buyer Agents (www.naeba.org).

One result of the mixed feelings among prospective homebuyers is that they're less willing to engage in back-and-forth negotiating with sellers when counteroffers are involved.

Even after agreement is reached on a deal and the results of a home inspection come in, many buyers continue to demand concessions when flaws are found. Unless the flaws are corrected, they often want the deal to be re-cast or they'll walk away.

"Buyers still have a lot of leverage and they're obviously willing to use it," Crowley says.

Eric Tyson, a personal finance expert and co-author of "Home Buying for Dummies," says it's understandable that many buyers are still ambivalent about making a purchase, given the current level of economic and political turmoil.

Because all real estate markets have their own characteristics, and recovery is still stalled in some markets, he encourages buyers to carefully monitor market conditions in any area where they'd like to live, and to avoid waiting too long if they're seriously interested in taking the plunge.

Are you considering a home purchase in the near future? If so, these tips could prove useful:

-- Confirm your reasons for planning a purchase.

Anxiety can prevent people from moving ahead, even when it's against their interest to hold back. But those convinced that now is a good time to buy shouldn't let unwarranted fears constrain them, says Sid Davis, a real estate broker and author of "A Survival Guide to Buying a Home."

"If your job is secure and you have found your dream home, don't let groundless concerns block you," Davis says.

Davis says one way to put your fears about real estate in perspective is to re-examine your original reasons for buying. Have you yearned for a home of your own, but couldn't afford to buy until prices moderated? Or has your family outgrown its small house and you're seeking to trade up to a large space?

"Whatever your reasons for buying, you should be aware that waiting could be counter to your interests. In some neighborhoods, we're already seeing robust real estate markets where available property is starting to dry up," Davis says.

-- Find a skillful mortgage lender to help guide you.

As Davis says, lenders now want certainty that any mortgage they originate will be solid. This means you'll need to be well prepared to answer the lender's request for documents.

"To satisfy the lender, I recommend that even before you start shopping for homes, you pull together the key documents you'll need to show you're worthy of a loan," Davis says.

As proof of income, many mortgage lenders now insist on much more documentation than the customary pay stubs and W-2s. They may also require federal tax returns. Also, most lenders now want proof that the funds you've amassed for your down payment have been in your savings or checking account for some time and weren't just borrowed last week from a family member. That means you'll need to produce account statements verifying this.

Those who are self-employed can expect their lender to do a rigorous review of documents related to your business.

But the time you spend documenting your eligibility for the home loan will be worth it if your lender gives you a "pre-approval" letter. This you can use as a bargaining chip when negotiating for the property of your choice.

"Getting pre-approved makes you a stronger contender for the home you want. It gives sellers the confidence that they have a bird in the hand," Davis says.

-- Know your market, and make your decisions accordingly.

Many neighborhoods still have an unusually large number of homes available for sale. But in other areas, inventories are shrinking.

If you live in an area where many housing options are available, you can afford to take somewhat more time to make a selection and seal a deal. But Davis cautions against waiting indefinitely to buy in any popular area.

"If this is the right time for you to buy a house, don't be haunted by past problems with real estate. Times are changing and you won't want to be left out," he says.

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