By Gerri Willis
WHETHER YOU’RE A BUYER OR SELLER, you need a competitive edge to get ahead in real estate today. Here are some solid strategies to help you get the most out of the market.
IF YOU WANT TO BUY
Be an attractive risk. Your credit score determines the interest rate a bank will give you on a mortgage. The difference between decent and terrific credit can ass tens of thousands dollars over the life of the loan. To improve your rating, pay down your credit card bills. Lenders want to see that your debt doesn’t exceed 30% of your available credit. But don’t close an account once you’ve paid it off- doing so will actually hurt your score.
Buy only what you can afford. Most banks now require a down payment of 20%, but if you’re an attractive borrower, 10% may suffice. Still, the less you put down, the more you’ll pay in fees and interest. Spend no more than a third of your total pre-tax income on housing costs: mortgage, maintenance and property tax. Figure maintenance to be about 1% of the value of your house each year.
Chose your loan carefully. Many homeowners are in trouble because they took out adjustable mortgages with low interest rates that later spiked. A 30 year, fixed-rate mortgage is your best bet- adjustable mortgages don’t offer the rate breaks they did during the boom. Use the internet to do your research. You’ll find articles, statistics and general resources that will help you determine which banks offer the best rates in your area and around the country.
Lowball’em. Bidding wars over a house are uncommon in today’s climate. Sellers anticipate having to drop their asking price. Bid low and see if the seller will come down.
IF YOU WANT TO SELL
Think twice before you sell. This is a bad time to expect big returns. If you don’t have to sell now, don’t. Make inexpensive improvements and wait until market factors are more in your favor.
Find the best broker. A year ago, you could have asked agents to cut their commissions because houses sold themselves. Now you’re better off paying the full 6% to ensure you’ll get the best service. Local agents are the best. They know the selling points of your community-and your house- and can be present to show it to buyers at a moment’s notice. If they worked in the business before the boom, they’ll do more than just weigh the best offers.
Make sure the price is right. A good agent will know what numbers get the best response from consumers. Studies show that buyers react to break points, or psychological limits. For example, a buyer with a budget of $250,000 may be willing to pay $249,000 but not $251,000. If your home is valued at $310,000, consider listing it at $300,000 or even $299,000 to maximize its sales potential.
Know which way the wind it blowing. Pricing in a free falling market is dicey. Brad Inman, publisher of a real estate trade publication, recently helped his parents sell their condo in Las Vegas. Pricing it at a market value of $185,000 to $195,000, he says, would have been a disaster. “We had to anticipate how much prices would fall in the time it would take to closes [30 to 60 days].” So they listed the condo at $179,000 and accepted an offer of $175,000 while owners cut prices by 10,000 to 20,000. “You want to avoid time on the market to stay ahead of the falling knife,” says Inman.