The current real estate market presents great opportunities for anyone shopping for a home in the Sacramento area.
Interest rates are as low as they have been in many years. The large number of single-family homes and condominiums for sale in many markets offers a wealth of choices for the buyer to peruse. Sale prices have dipped in many communities, and sellers are much more willing to negotiate.
However, even in this buyer’s market, consumers need to be savvy in order to get the best deal possible.
Should you buy a foreclosed property and how do you do it? Why are prices down in one neighborhood but up in another? Should you wait to see if we are at the bottom of the market?
The myriad of questions and issues facing consumers can make buying — even now — a daunting process.
Here are some tips to help make the process go a lot smoother and ensure that you get the best value for your money.
First and most important, don’t try to time the market.
Trying to time the housing market isn’t any easier than trying to time the stock market. Experts, like real estate economists, have been notoriously bad at predicting the future market, so what chance do you and I have? The problem is that no one knows what the future holds. You never know when you have hit the bottom of a real estate cycle until prices already have rebounded. By then, of
course, it’s too late.
One thing is certain right now — the housing market has softened and buyers have a window of opportunity to jump in while mortgage rates are low and prices have eased. If you intend to stay in your home for at least the next few years you should be just fine. Historically, down cycles in California real estate are relatively brief and shallow. Over the long run, prices in the Golden State have more than held their own with other investments, according to figures from the California Association of Realtors.
Consider buying a real estate owned property from a lender, but be aware of the drawbacks.
The number real estate owned properties has steadily increased with the softer market. REOs can be a great opportunity for buyers to get a property at a discount. These properties are owned by lenders who prefer to be in the banking business and not the real estate business. Therefore, they are often willing to sell a property at a lower price to get it off their books.
But buying real estate owned isn’t as easy as you might think. The REO departments at major banks understand price and market value and while they are willing to negotiate, they will not just give away their properties.
In fact, we are actually starting to see some of these properties attracting multiple offers, so prepare yourself for competition over the best bargains. You can assume that unrealistic offers will be rejected.
You should also make sure to understand the condition of the property. Some are in good shape, but others may need a great deal of work and repair. This is not the time to waive a property inspection. REOs can be a good deal, but not if you have to spend more tens of thousands of dollars making repairs.
Get a pre-qualified loan commitment.
Home buyers need to determine how much home they can afford even before they start looking for a home. A buyer who is already pre-qualified by a lender is also taken more seriously by sellers and is in a much better position to negotiate with a seller and move quickly when he or she finds the right home.
Getting pre-qualified is particularly important if you are trying to buy a foreclosed property. Most real estate owned sellers will not even review your offer without a lender’s prequalification letter, or if you are paying cash, some type of proof of funds.
They’re not about to allow you to tie up their property without first verifying that you’re a qualified buyer with the means to close. It can also be a good idea to consider the lender that owns the property for your loan.
Negotiate on the incentives.
More and more sellers are offering a variety of incentives to buyers in order to move their properties — anything from homeowners dues to cash back for remodeling or even cars and vacations. If you negotiate an incentive make sure that it makes sense for you. Having a seller set aside funds to remodel the master bath or install cabinets in the kitchen may be worth more to you than a trip to Hawaii.
Shop around, but not forever.
It’s true that buyers generally have more time right now to look at properties and consider the best value for them. But even in this market, there are sub markets that are still very much in demand. Well-priced homes in good condition in sought-after neighborhoods are still attracting strong interest from buyers. In some cases, buyers have been surprised to learn that the home they thought was all theirs is the subject of multiple offers! So when you find the right home it’s important to move quickly and be reasonable in your negotiations. This market can still be a win-win for both buyers and sellers.
Use an experienced real estate professional.
In this current market with so many questions and issues, it’s more important than ever to have a seasoned real estate professional help you. Housing markets vary from city to city and even neighborhood to neighborhood. Your Realtor should have experience in the geographical markets you’re interested in moving to. This is particularly important considering all the issues associated with buying a REO property. Working with an experienced Realtor will help you get the best value for your money and avoid costly pitfalls no matter what type of home you want.
Bob Bronswick is president and chief operating officer of Coldwell Banker Residential Brokerage in Sacramento/Tahoe. For more information, contact Coldwell Banker at (916) 797-5413.