Buying or selling homes in a tumbling market
If the current housing market has taught us anything it’s this says a recent Money Magazine article:
You should think of your home primarily as a place to live, not as an investment.
Regardless of whether you are in the market for a new home, trying to sell your current home, or still interested in using real estate as an investment Money Magazine has some advice for you.
Advice for home buyers
- Factor in future price drops - If the home you are planning to buy is in an area that is expected to fall by 10% make sure to reduce your buying offer by 10% to account for the drop. If they seller refuses, it’s not like there aren’t other houses out there.
- Consider foreclosures and short sells - You can save a lot on a house if you are willing to buy a property in foreclosure or a property that the bank is willing to short. But beware, some of these properties are damaged. You should have an inspector assess the damage and estimate the cost of repairs so you don’t lose all of your savings by spending on fixing the place back up.
- Choose your mortgage wisely - Try to get the best mortgage rate possible by offering up the largest down payment possible (20% if you can).
Advice for home sellers
- Yes, your house is worth a lot less than it was. And no, it’s not going back up. - Time to face reality. The housing market has crashed. You can either resign yourself to staying in your home or you can accept the losses and move on.
- Fix up your house - It’s a buyer’s market right now which means that you’ve got a lot of competition. Get ahead of all the other people selling houses by putting in some time and money and making sure that your house looks top notch.
- Be creative about selling - If you need need to sell your house but can’t, consider turning it into a rental property. Or consider rent-to-own options. Even if no one buys you’ll be able to pull in some money from your house which you can use to help with the mortgage payments.
Advice for investors
- Invest for the long term - Flipping is dead in most areas. If you are going to invest in real estate do it for the long term. Consider investing in a vacation home or future retirement property. Alternatively, consider buying homes for the purpose of renting them out.
- It’s all about location! - If are buying future rental properties buy ones that potential renters will actually want to live in. Potential renters are people in their 20s and 30s. They tend to like houses near urban centers, public transportation, universities, major employers and places with jobs. They aren’t going to flock to rental properties out in the boondocks that are near nothing that would interest a young person.
- Get pre-approved - Given the housing market crash most lenders are leery of investors. So get pre-approved before you go house hunting.
Finally, Money offers up a list of the housing market forecasts through the rest of 2009 and into 2010 for the nation’s 100 largest metro areas.
