By Charles Warnock
It seems that everyone loves a good real estate story. The media is filled with reports about soaring property values and home owners of modest means becoming instant millionaires when they sell. As a result, many first time home buyers, afraid of missing out, will rush into buying decisions and achieve less-than-spectacular results. As a first time buyer, your biggest challenge is to balance livability and profitability in a way that makes sense for you and your family. Remember, you are buying a home first and an investment second. Of course, there’s no foolproof formula for buyer success, but there are steps you can take to stack the odds in your favor:
Tip 1: Don’t bet on market timing
If you’re waiting for prices to drop in places like Southern California, Washington D.C. or Miami, you may be waiting a very long time. In regions that are built out with limited room to expand, it’s not realistic to assume property values will fall dramatically. Of course, prices in the nation’s super-heated residential markets (much of California, Nassau-Suffolk Counties in New York, South Florida) should cool down at some point, but there’s no guarantee that higher interest rates won’t eat up any savings from a price correction. If your personal circumstances say it’s time to buy, high prices alone shouldn’t keep you on the sidelines. Current interest rates are still historically low, so you may consider locking in a mortgage before rates head north. Even in booming markets, there are good deals for those willing to devote some time and energy to finding them.
Tip 2: Leverage free and low-cost resources
There’s an abundance of free and low-cost resources for homebuyers on the Web. A Web search can turn up helpful articles, buyer guides, online tools and purchase/ refinance calculators. Keep an eye out for helpful tools like step-by-step guides and checklists to help organize your search. Some Web sites now offer online tools to help you estimate home prices and search for undervalued properties. Many offers on the Web for free property valuations actually are come-ons from real estate brokers looking for seller listings, so check first to see what strings are attached.
Tip 3: Check out the new models
Real estate’s old guard seems to be under assault at every turn today as traditional brokers battle competition from discount and Web-based brokers. Today, buyers have more options than ever before. You can use a full-service broker, discount broker or buy without a broker. To make buying more affordable, consider the homebuyer rebate programs that are becoming more popular. Rebates can help offset closing costs, which are a real obstacle for many first-time buyers. Be aware that some states currently ban real estate rebates all together, and others limit rebates to credits applied to closing costs. Rebate fans around the nation are keeping a close eye on Kentucky, as the Justice Department recently sued the Kentucky Real Estate Commission for violating antitrust laws. Kentucky is one of 15 states that ban or limit real estate rebates.
Tip 4: Lock in a realistic budget
To save time and trouble, first time buyers should have a realistic budget in mind before they shop for homes. One way to determine how much house you can afford is to get “pre-approved” by a lender. Pre-approval means you know exactly how much of a loan you’ll qualify for, so you can limit your search to homes in the right price range. Pre-approval also boosts your credibility and negotiation position with sellers. Most lenders will offer pre-approval as a no-obligation free service, in hopes of winning your business.
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