Buying and Selling a Home

In this cooling market, sellers have to find the pricing sweet spot and work harder to reel in a buyer, who has more homes to choose from and more bargaining clout.

By Pat Mertz Esswein, Associate Editor, Kiplinger's Personal Finance

January 2007

Buyers: Don't wait

Is now a good time to buy? Re/Max chairman Dave Liniger gave his four children some advice when they asked if they should buy or wait: "In every case, I advised that it's impossible to time the market -- no one can say accurately what will happen." He recommends that buyers go ahead and buy something if they want to stay in the house for at least five to ten years. "If prices go down, you're not hurt -- you are in the house you want to live in," he says.

That was the goal of Jeff Organ and his wife, Danielle Guildner: a home where they could have a yard, a dog and a family. Their two-bedroom condo in Carlsbad, Cal., didn't fit the bill -- and they didn't want to stay in California. They did some Internet research, then visited a friend in Austin, Tex., which they found to be young, artsy and friendly. "Strangers say 'Hi!' to you," says Jeff. "It's a different mentality."

The couple set out on a tour with a real estate agent, who showed them spacious new homes that they could afford. They put down $8,000 on a 2,700-square-foot house that cost $211,000 and had four bedrooms, 2.5 baths and a yard. Although they negotiated a bit on $30,000 worth of upgrades, they basically paid the asking price. "The builder wasn't in a negotiating mood," says Jeff. And besides, he notes, the price was still half of what they would have had to spend in California.

Housing demand in Austin is rising with the recovery of the tech industry, and the city is attracting baby-boomers looking for affordable places to retire. Last spring, the median home price was $167,200, up 8.5% from the first quarter of 2005. But price hikes have been subdued because builders are busy constructing new homes. That's one reason Danielle found it easy to transfer her job in new-construction lending with Wells Fargo Home Mortgage to Texas. Jeff, a teacher, began teaching in Austin this fall.

Unfortunately, Jeff and Danielle are still linked to their former home -- as landlords. When their condo failed to sell for a price that would cover their costs, the couple decided to rent it out for the foreseeable future. Even though the rental income doesn't quite cover their expenses, it beats making two full mortgage payments each month.

Even in cities where prices have cooled, it's not totally a buyers' market -- sellers just have less of an advantage. Competition for homes in some cities remains brisk. Short of moving to a lower-cost state, you're more likely to find a bargain if you're willing to make small compromises -- for example, buying a home that's in less-than-mint condition or one with a less-than-great view or location, or a less-than-premium lot. As the market slows and interest rates rise, you may get a deal on properties owned by investors eager to sell or homeowners who find that they can't tolerate their new adjustable-rate-mortgage payment.

Target your offer. Start by finding out how motivated the sellers are, then target your offering price. Roberta Murphy, the San Diego agent, tells buyers that if a home is new to the market and priced very well, they should make an offer at the top of the range; if the home has been on the market for six months, they might make an offer at the bottom of the range or even below.

Many builders have begun to offer incentives and upgrades as their new-home inventories grow fatter. If those aren't advertised, negotiate for them. You may find bargains on resale homes in developments where builders are still selling new properties. The owner of one slightly used property may have more freedom to reduce the price than the builder who has already sold 200 at the higher price.

Win the beauty contest. You may still find stiff competition for properties with the greatest discounts, so you'll want to look like a sure thing to sellers. Get preapproval for financing and try to schedule appraisals and inspections in advance to minimize the time they'll take. You can even write a "love letter" to the seller, pleading your case.

Protect yourself. In some of the hottest markets over the past few years, buyers have felt compelled to make "clean" offers. As sanity returns, get price and property protection by adding contract contingencies for a current appraisal, financing and a home inspection.

Check your insurance

Homeowners. Before you close the deal on a house, check out its CLUE (Comprehensive Loss Underwriting Exchange) report at www.choicetrust.com. That's the database in which most auto and homeowners insurers share information about losses filed by an individual or on a particular home. You might have a tough time getting coverage if a lot of claims were filed in the past.

When shopping for a homeowners policy, check first with your auto insurer. Many companies offer a discount if you buy both kinds of coverage from them. Also compare rates from other companies online at Insweb.com or through an independent agent in your area. You can locate one through the Independent Insurance Agents & Brokers of America Web site, www.iiaba.org.

Auto. Tell your insurer about your new house. Some companies consider homeowners to be better risks, and your rates may drop if you have moved to a quieter area and park your car in a garage.

• < PREV
• 1
| 2

• Print
• Comments
• Email
• RSS