First Time Home Buyer?  

Why Now is the Perfect Time to Buy a House! 

You’d have to be living under a rock not to know that the housing industry is in a mess! Anyone who watches the news, listens to radio or reads a newspaper or magazine has been told that now is the worst real estate market in recent memory. House prices are down. House sales are down. Inventory is up. Foreclosures are up, way up in some places.

While all of this is true, it just might be the best market in the last 15 years for first time home buyers.

Why? Mortgage rates are down…way down. Credit worthy buyers can qualify for rates at around 5%. And you can get an FHA loan with as little as 3.5% in the deal. Home prices are down as well…sometimes by as much as 20% or more depending on the area of the country. So finding a home you can afford is easier now.

Congress has also extended the 8% tax credit for first time home buyers until April 30 and they could extend it again after that. Buyers who currently own a home are eligible for a tax credit up to 6.5%. Some lenders will allow you to borrow the credit and use it towards your closing costs.

And there are plenty of homes to choose from. Inventories are up – so finding a house that is perfect for you is easier than any time in the last five or ten years. Plus, desperate sellers are often willing to bend over backwards to make the deal. That includes price concessions, sellers’ assists, a willingness to make repairs and more. (A sellers’ assist is an amount of money from the proceeds the seller gives back to the buyer at closing, usually to help defray closing costs.)

But there are some things to watch out for. After all, you don’t want to overpay, especially in a declining market.

For example, many areas of the country experienced tremendous growth and development in the last five years. Chances are, these areas are overbuilt and demand for properties has slowed considerably. When prices were running up in the heyday of the real estate market, many speculators were snapping up properties in new developments, hoping to flip them and make a killing. When the bottom dropped out, these properties became distressed and put a lot of downward pressure on the value of their neighbors.

Buyers in these areas also paid too much in many instances. And, particularly in new construction, they bought homes without realizing the full implication of what the real estate taxes were going to be. The result: they ended up with houses they really couldn’t afford. And now they can’t afford to sell them because they owe more on them than the properties are currently worth.

That means the houses are necessarily overpriced when they go on the market. The owners don’t have any equity, so they can’t afford to attractively price their homes so they might sell. This leads to short sales or foreclosures. And while that sounds like an opportunity, it is a double edged sword. The moment someone on a cul-de-sac sells their house at a price below market, it immediately reduces the values of every house in the neighborhood, including the house that was just sold.

Why? Because that house will become the comparable value for the next house that goes on the market. Real estate agents and appraisers use comparable property sales within the last six months to price new houses that come on the market or value them for mortgage loans. And they advise their clients on what to offer based on these same comparables.

Another factor to be wary of when contemplating a distressed property, particularly a condominium or a house with a Home Owners Association: if the building is half empty or the development has many vacant homes, the monthly fees could suddenly become very high as the maintenance costs are split among fewer and fewer property owners. So, even though you might be able to pick up a condo in Florida for 50 cents on the dollar, your monthly fees could quickly make your purchase seem like not much of a bargain.

There are some other things to consider. The real estate adage, “Location, location, location,” has never been truer than today. Savvy buyers should be looking at properties that are convenient to work, schools, shopping and transportation. While gas prices have come down in recent months, they are almost certain to go up again.

Try to figure out how much space you need – and then buy a house that suits your requirements. If you are currently living in a one bedroom apartment, you probably shouldn’t be looking at 4000 square foot homes. The typical newer McMansion features 9 foot ceilings on the first floor, a 2-story foyer and a family room with an 18-foot ceiling. All this extra space is expensive to heat and cool, money that you will be spending year after year.

If you are thinking about new construction, you probably shouldn’t ask the builder to finish the basement. When the tax assessor comes around, the additional living space in the basement is often figured into your tax bill. But if you think you’ll want a finished basement down the road, ask the builder to rough in plumbing and make sure the basement ceiling is high enough and there is a secondary access to the outside either through a door or window well. Building codes in many areas require this.

Having said that, most buyers are looking for at least a three bedroom because they want a guest room and a home office. So buying something that is smaller than that might limit your ability for resale. You should also pay attention to the local school system, even if you don’t have school-aged children. Schools are a major determinant for home values.

Please consider engaging the services of a real estate agent. Try to find someone who specializes in working with buyers. The top listing agent will not necessarily be your best bet because they are likely to be more sympathetic with the sellers.

Since the seller pays the commission, a good agent won’t cost you anything and can save you a lot of money. Because they know what to look for in assessing a house, they can steer you away from properties that might require extensive repairs. And they will help you determine what to offer and negotiate the most favorable price.

Real estate agents are also plugged into the mortgage market. Most large real estate firm with a national presence like Century 21 or Coldwell Banker have established relationships with lenders. But any good agent has someone they work with routinely, and they will be happy to give you a recommendation.

Similarly, agents know good home inspectors and repair people should you need those services. You should never buy a house without getting a home inspection, even if you are purchasing an “as-is” property. You wouldn’t buy a car without a test drive, you shouldn’t blindly buy a house either.

So get yourself a good realtor, set some realistic housing goals and find yourself a home. Take advantage of the buyer’s market, low interest rates, tax credit and falling prices.