Smart Moves by Ellen James Martin

BUYING A HOME FOR THE VERY FIRST TIME

As the velocity of home sale increases, the real estate industry is watching one indicator closely: the number of first-time homebuyers in the mix.

"For far too many young people, it's been more of a renters' market than a buyers' market for many years," says Chris Polychron, president of the National Association of Realtors (www.realtor.org).

He cites statistics from a survey done by the association showing that the share of first-time buyers in the home-buying mix has been steadily dropping to its current level of about 33 percent. That's the lowest share since 1987.

While factors like high levels of student debt and slow wage growth have held back young buyers in the recent past, other things are starting to work in their favor, such as the gradual easing of credit standards and access to lower-down-payment mortgages.

Another major positive for buyers, according to Polychron, was the recent announcement of a reduction in the annual insurance premiums that must be paid by homebuyers who take out mortgages backed by the Federal Housing Administration (FHA).

These developments and overall generational trends lead Polychon to believe that an increasing number of first-time buyers will enter the market and close a deal this year.

"People's views on homeownership evolve over time. All it takes for many young adults to go from renting to wanting to buy is the birth of their first child. But even then, it's a challenge for young people living in a high- housing-cost market," he says.

Here are a few pointers for homebuyers, including first-timers, trying to beat the odds:

-- Take a strategic approach in the emerging buyer's market.

"It's a simple matter of economics. Where there are more sellers than buyers, the pendulum starts to swing back toward the buyer," says Sid Davis, a real estate broker and author of "A Survival Guide for Buying a Home."

Sometimes would-be purchasers shopping in a buyers' market feel guilty about pressing their advantages when bargaining.

But Davis says such feelings are groundless.

"Where they have the upper hand, sellers grin all the way to the bank. They (weren't) a bit bothered by using their leverage when they were in the stronger position. And the same should hold true for buyers," he says.

-- Watch overpriced properties for price reductions.

In an area where the market is shifting in favor of buyers, it sometimes takes sellers time to adjust their thinking.

Have you targeted a neighborhood where you have a strong interest in one or more homes that you and your agent believe are priced well over market value? Then Davis suggests you may wish to wait until the sellers come down on their own before you start bidding.

"One day, sellers who've been unrealistic might wake up in a panic. After their house has been on the market for a good while, reality hits them between the eyes and then suddenly there's a big price drop," he says.

A significant price drop is often a signal that once-stubborn sellers are ready to bargain in earnest, maybe because they face a deadline of their own.

The key to a wait-for-a-price-drop strategy is to keep a close eye on a home so you can submit your bid at the opportune moment and not lose the property to another purchaser.

"Make sure you stay in close touch with your buyer's agent so you'll know the minute a price drop occurs. It's also a good idea to set up an alert to notify you by text or email that a price drop is occurring," Davis says.

-- Make sure you take full advantage of your right to a home inspection.

In sellers' markets of past years, would-be buyers who had to contend with rival purchasers would often waive their right to a home inspection to increase their appeal to sellers.

But Tom Early, a veteran real estate broker, say inspections are nearly always a vitally important idea, especially for those planning to buy a property that's over 15 years of age, which could have serious problems.

"If your inspector finds terrible things wrong, you may want to walk away from the deal before it closes," says Early, who was twice president of the National Association of Exclusive Buyer Agents (www.naeba.org).

In most cases, inspectors don't find serious shortcomings. Still, Early says that many lesser issues that are found can be used to the buyers' advantage in gaining concessions.

-- Don't insult the owners of any property you'd like to own.

In areas where rising inventories are giving buyers more power, Davis says some prospective buyers try to take liberties that can backfire.

One common mistake involves any statement you might make that wounds a seller's pride in their home. Another misstep involves making a ridiculously below-market bid which so stuns the owners that they may refuse to deal further with you.

"People who make ludicrously low offers are often the victims of their own folly," Davis says.

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