Smart Moves by Ellen James Martin

BUYING SMART MEANS BUYING METHODICALLY

Are you a homebuyer who's targeted a popular neighborhood where available properties are in short supply? If so, you could face intense competition from bidders willing to pay more than asking prices to grab a property. Currently, such "low inventory" communities are common.

But in a surprising number of neighborhoods, supply and demand for residential property are now leveling, giving purchasers somewhat more wiggle room than before, says Selma Hepp, chief economist for Trulia, the San Francisco-based online home shopping marketplace.

"If you're moving to an area that's not experiencing a lot of job growth ... you could have a pretty balanced market at this point," Hepp says.

Hepp suggests curious buyers ask their real estate agent to check "days-on-market" data for the community. If it's taking longer for homes to go from listing to sale, that could be a sign of gradually expanding inventory.

Another indicator relates to price. If the margin between asking and closing prices is widening at the sellers' expense, Hepp says that's also a sign that the area could be tilting in favor of buyers.

Tom Early, a real estate broker and former president of the National Association of Exclusive Buyer Agents (naeba.org) says that to take full advantage of a changing marketplace, buyers must be methodical. Here are a few pointers:

-- Begin by determining your affordability ceiling.

It's always wise to ask for an early reality check from a lender on how much you can spend, says Eric Tyson, co-author of "Mortgages for Dummies" and several other real estate books.

After reviewing your income, assets, liabilities and credit history, the lender will calculate your ceiling. Once this is done, you'll receive a letter indicating how much you could borrow for a home.

As Tyson notes, going through the pre-approval process has two advantages. One is you can shop for homes with a set price ceiling in mind. The other is that pre-approval gives you better negotiating power with sellers -- because they'll know you're a sure bet to finance the sale.

-- Define your priority list thoughtfully.

Assuming you're like most buyers, you know what you don't want in a property. But many buyers have focused far less on the features that would constitute their dream neighborhood. And these items can vary widely from buyer to buyer.

"What's smart is to think in the affirmative about what you do want and then shop with that mental picture in mind," Early says.

Sit down with pen and paper and list the qualities of your ideal home. Then rank them in order of importance.

"Would you rather have a huge 'great room' ... or a formal dining room suitable for large family dinners ... ? Nearly all buyers confront trade-offs," Early says.

Thoughtful consideration of your priorities could lead to the realization that your top goal is more living space. Even some retirees with grown children may wish to upsize to accommodate out-of-town visitors, including grandchildren and friends.

Other common priorities involve ownership in a neighborhood with top-rated schools or easy access to a light rail system for hassle-free commuting.

-- Ask your real estate agent to pre-screen homes for you.

Early says one way to shorten your list is to ask your real estate agent to preview properties in person.

"There are limits to what you can tell about a house through online sources. But based on your agent's description, you could scratch some places off your list," he says.

-- Take note of your reactions to the properties you visit.

Because no real estate agent is a mind reader, it's important for buyers to provide continuous feedback on their likes and dislikes to their agent.

But in areas with rising inventory levels, buyers sometimes become bewildered and lose clarity on their own reactions, as you might if faced with dozens of options in the frozen pizza aisle at a supermarket.

One way to help track your reactions to the homes you visit is to use a small notebook to jot down your thoughts after each property tour.

"You don't want to get 'buyer blur,' as happens when people look at too many houses during one outing. Avoid visiting more than about four in one day -- especially if they're very similar and are located in the same development," Tyson says.

-- Keep an open mind on alternatives.

Early tells how after much discussion, a couple of his clients -- a radio talk-show host and his homemaker wife -- made a firm agreement to seek a traditional colonial house and were shown many such properties.

But then Early added a wild card to the mix -- showing them a contemporary with a flat roof, soaring ceilings, a massive stone fireplace and a very open floorplan.

"To their great surprise, this couple loved the modern house much more than the colonials, which had boxy rooms and less open floor plans. The lesson in all this is that sometimes buyers don't really know what they'll like until they see it," he says.

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