If you’re a home buyer, you can get a very low mortgage rate, but you’re also facing much tighter credit standards and the need for a big down payment.
BankRate.com says no one can accurately say when the market will rebound, but a recent survey from PricewaterhouseCoopers and the Urban Land Institute of 600 industry experts predicts we should start seeing a rebound in 2010.
That’s great, but what about now?
Here’s advice from
BankRate.com for buyers and sellers on how to survive in 2009.
Advice For Buyers:1. Cash is the new king
If you can spare the cash, you can buy a house. In the past, experts have tried to persuade people to seek out more liquid investments for their cash on hand and grab an easy-to-get low-interest mortgage. Now, with the equity markets depressed at the same time that mortgage loans are hard to find, the tables have turned. Those wielding ready cash in a recession are always ahead of the game.
2. Negotiate extras ... and more extras
While sellers continue to offer throw-ins such as built-in appliances, flat-screen TVs and even cars, the best extras are the ones that take monetary form. Think paid closing costs, a year's worth of property taxes, repair credits and paid homeowners association dues, to name only a few.
3. Start a down payment fund
The goal should be to save 20 percent. Set monthly saving goals. It will be worth it in the long run when you have lower house payments and higher equity.
4. Determine your own home buying budget
Do this before you start talking with lenders. They will tell you what you qualify for, but only you can determine what you can really afford. Be realistic and make sure your entire budget isn’t going to your mortgage payment. Think about unexpected expenses that pop up and leave yourself some room to breathe.
5. Clean up your credit score
You've heard this one before. But now it's more important than ever if you hope to get home financing in '09. Correct reporting-agency errors that may be dragging down your score. Pay your bills on time. Pay down active credit cards, but don't close out paid-off accounts.
6. Research equals savings
Agents will almost always tell you that the time to buy is now. But do your own research. Go online and scour newspapers and other local sources looking for housing inventory backlogs, the average for-sale time that homes are on the market and average selling prices. Also, look out for the number of area foreclosures and major-employer layoffs.
7. Don't overlook neighborhood issues
If and when you do qualify for a mortgage, don't overlook these important issues in the area: quality of schools, traffic noise, upcoming zoning issues, neighborhood stability, home turnover, crime levels and the presence of any sex offenders. This is where a strong, veteran real estate agent can assist.
8. Watch for foreclosed-property inventory to loosen
Banks soon will be under greater pressure to cut their losses on property they own through foreclosure and to increase revenues. With a smaller percentage of distressed homes selling at auction, banks are loaded up with more of these nonperforming assets.
9. Look for other looming opportunities
Can't get a loan? The financial markets should begin to untangle at least a little bit in 2009. The newly Fed-fortified banks will, or at least should, start moving that money. But don't expect a return to zero down payments.
Advice For Sellers:1. Price correctly from the get-go
Don't start out too high-priced just to test the waters. Your backup plan of adjusting on the fly may be a deal breaker. The first 30 days a home is on the market are when it gets the most attention from potential buyers and their agents. Don’t scare away potential buyers during this crucial time by being unrealistic about your price.
2. Fix earlier pricing mistakes
If you've already made the pricing mistake of not following the tip above, consider taking the home off the market and repositioning it for later entry. If you simply persist with that original, now-discounted offering and keep dropping the price as the months go by, lowball buyers and their brokers will be waiting in the wings to see how low you'll go next month. If you do take the home off the market, make some relatively simple cosmetic improvements such as new paint and landscaping. Then list it again, but at the right price this time.
3. Looks do matter
Don't underestimate the importance of curb appeal. Not only is there a price war going on out there, there's also a beauty contest being staged. If your home's outside doesn't pass the drive-by test, the interior won't, because it will not be viewed by serious buyers, who are already off to view the next home on their list.
4. Don't overdo it.
If you go too far in improving your place, you likely will not be able to recoup your remodeling investment. Don't over-invest to the point where your home greatly exceeds competing properties in your price range and neighborhood. And keep color schemes neutral for best sale potential.
5. Don't be an ambiguous seller.
Either you are going to sell or you aren't. If you manage to fetch a decent offer with a test listing in this market, commit to sell. You may be able to buy a better house at an even lower price with so many steals still out there.
6. Be an energy miser
A low or midgrade energy retrofit will make your home greener and more marketable, and it won't bankrupt you. The selling point of seeing thousands of dollars in energy savings down the road is a timely one.
7. Know all of your options
If you, like many of us, have lost significant value in their homes or are upside down on your loan and can't refinance, plan your next step.
Consider negotiating an alternative payment arrangement or find a buyer to assume your payments.
8. Become a landlord
This approach is best for people who aren't too far behind on their payments. Yes, those newly reset adjustable-rate monthly payments are often higher than the rent you can fetch, but the rental market has made a comeback with so many foreclosure victims out on the streets.
Give first priority to possible lease-option or lease-purchase tenants. In a lease option, a renter pays more than the established monthly rent for the right -- but not the obligation -- to buy the property later. A lease-purchase pact is similar, but it obligates the renter to buy.
If you are not able to carefully screen renters and carefully look after your property in any of these scenarios, don't become a landlord.
9. Don't sell in a panic if you don’t have to
Unless you owe more than what your home is worth or face a job change, relocation, divorce, health crisis or other major negative life event, then wait until next year or the year after to sell. Current conditions are not permanent.
