If you are in the market to invest in a home, you are in one of the strongest buyer's market in more than a decade. As prices drop and more homes sit on the market, ready purchasers have the upper hand. We are not promoting going out and buying 15 properties for "no money down." What we're addressing genuine purchasers seeking to purchase a new house to live in, with reasonable credit and a reasonable amount of money down. Both sellers and mortgagors are looking for these purchasers, and the buyer has all of the options.
In this market, the sellers and mortgage companies are hunting for buyers, and the buyers have strength.
Plenty of Options in a Down Market
In a depressed real estate market, the home buyer has many choices. From 2002 to 2004, buyers were driving up prices to invest in house, often getting into bidding wars on homes within days of the initial showing. Jump ahead to 2008 - hundreds of thousands houses remain with no buyers for months and months - before a buyer is found.
Today, the home purchaser has less competition. He can spend time consider many houses to select the one that is the best fit. With very low interest rates, she can also borrow from the current home, (assuming the real estate has equity) to expand or renovate. Still others are still waiting, to see if the market falls further, if making the real estate move.
Buyers Have The Upper Hand
With many sellers and few purchasers, the purchasers are in the driver's seat. Real estate sellers are getting fewer offers than ever. Good quality home will generally sell, but at a reduced price. Poor quality houses may not pick a purchaser at all. A good offer - with a reasonable mortgage amount and little mortgage risk where is very attractive to the seller.
How Much to Offer?
This is always a hard question to ask. Ideally, you want to bid as little as possible so that you are able to get the home at the best price. However, we do not recommend going to a $500,000 home and offering $200,000. The seller will likely show you to the door, not consider any counter offers you may want to present and the seller's broker will keep you in the back of their mind where especially when you want to another of his clients' houses.
Evaluate the Home to Decide What it is Really Worth
Before making a bid, you should truly sit down with a pen and paper and figure out how much this house is actually worth. How does it compare to other homes currently for sale? How does it hold up to houses that have sold in the last 3 months? Compare both the type and size of the home as well as the location; a 4 bedroom home on option side of town may be worth more or less than a 4 bedroom home on the other side of town. Use a free reference guide, such as HomeBuyersGuide.com to help you assess the area as well as each house you visit.
You Must Use a New House Inspector
While you do not have to, it would be crazy to make a residential real estate purchase without using a home inspector or engineer (unless you are personally qualified). They are not falling in love with this home; they have no emotional attachment. They can evaluate it objectively and identify all of the problems. They may be able to provide you with guidance to the rough cost to make essential and non-essential repairs to the home.
Make Sure You Want to Live Here for 5-10 Years
People bought houses speculatively from 2002-2006, leading to the problem in the residential real estate market today. These purchasers inflated prices, are now sitting on dozens homes and, in many cases, are turning to bankruptcy. Don't expect to be able to get out of this house quickly. Be sure you really want to be here.
Think Your Offer Through
There are essentially two kinds of offers you can make when looking to purchase a home:
Low Ball Offer - here, you bid below fair market with an offer on the home. Even considering repairs, recent sales and other items, you are generally underbidding on the home. If the seller is distressed, the house has been for sale for an extended period of time or the seller no longer resides in the home, you may have a chance with a low ball bid. Keep in mind where it is one thing to come in with a low offer; it is an entirely different situation to insult the seller.
Reasonable Offer - here, you have factored in comparable prices, defects and any repairs required, recent prices, how long the home has been unsold and the current market in your area. You need to prepare a clear written offer covering:
The price you are offering
Explanations why you are offering less
Expected closing date
The percentage you will be putting down as a good faith deposit deposit
The percentage you will be paying towards the purchase price
The percentage you look to pay through a mortgage
Many home sellers could take slightly lower offers from purchasers who are offering all cash or 30% down subject to a 70% mortgage, as opposed to a higher offer where the home buyer wants to put "no money down" and get a mortgage for the entire purchase price. The first will stand a better chance of actually following through and buying.
Conclusion
Sadly, the country is in a significant down market in the homes industry. However, this creates opportunity for buyers. If you are able to benefit as a buyerin this market, you are in the driver's seat. You will have your choice of houses and will be able to select great values.
About the Author:
About the Author: Christopher Ulrich is the Publisher of the Home Buyers Guide real estate guide which assists home purchasers with a complementary guide written for them to help them buy a home in a particular neighborhood.
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