Friday, February 12, 2010

Home Buying Season Secrets

Wasn’t it just the other day when that large furry brown member of the rodent family emerged from his home in Pennsylvania and saw his shadow, thus guaranteeing us another six weeks of winter? Well all I have to say about that is BAH!! Regardless of what a celebrated marmot says I say winter may last another six weeks, but I believe the temperature in the OKC metro housing market is about to warm up.

I share an office with realtors at Metro First Realty in Oklahoma City. There are about 140 realtors working out of that office and while none are bragging about having too much business, I do hear conversations that their phones are beginning to ring with people making inquiries about homes.

So call me an optimist or say I’m delusional, but I’m writing this article to share with you some secrets that just might come in handy should you find yourself in the market to buy or sell a home during the upcoming home buying season.

Buyers remain the boss. Few of us know someone who recently put their home on the market and watched it sell within a few weeks. Most of us know the family who has had their home on the market for months with little activity. My own parents listed their home for sale in northwest Oklahoma City and showed it only twice in twelve months. Home sellers need home buyers, and home buyers are playing hard to get.

Weather the perfect storm – low rates, dropping prices and tax credits. Yes now is a great time to buy a home…if you have three things. Steady employment, at least a 3.5% down payment and good credit. If you have these things, then you can take advantage of rates in the low 5% range, seller’s willing to negotiate on price and federal tax credits when you file your 2010 taxes.

Prepare for credit shock. I still receive calls about once or twice a month from someone who is self-employed wanting to know if they can still get a home loan based on their credit score without having to prove income. No, you can’t. A lot of lenders are even beginning to raise their minimum credit scores for the “easy to qualify for” FHA mortgages. Very few lenders (present company included) still offer FHA loans with a 620 FICO. Most have raised their minimum scores to 640 or higher.

Think long term. “What if I buy a home and the value continues to fall?” Fortunate for home owners here in the OKC metro, housing values have grown over the past twenty years at a modest 4% to 5% per year. Other markets around the country experienced exploding home values in the double digits. And now these markets are reaping the fallout from overinflating their home values. Our economy is cyclical and what goes down, will also go back up.

Timing the market. Investors try various strategies every day to buy stock at it’s absolute lowest point so they can take advantage of it’s rise. Home buyers try and apply the same strategy. The problem is most of the time there’s plenty of a particular stock to go around even if other investors want to buy the same stock. But when you find a home that meets your needs and fits your budget, the stock strategy of timing the market may not be so smart. There are a limited number of houses that truly meet your criteria, but there are other buyers out there who share your buying position and are probably looking for the house you just found.

Go to the concession window. Sellers want to sell their homes. In some cases, they need to sell their homes. Because of this need, many sellers are willing to “chip in” to pay for some or all of a buyer’s closing costs. FHA still allows for sellers to contribute at least 3% of the purchase price toward the borrower’s closing costs.

Foreclosure properties can be a good buying option. But they can also present unique problems inexperienced buyers should be aware of. If you’re interested in buying a foreclosed property, my best advise is to work with an agent experienced in these types of sales. Their advice and their experience will prove invaluable to helping you pick the right property and avoid buying a lemon.