We've all heard the horrible stories of crashing housing markets. However, for the newly married couple or anybody looking to make their first purchase, this opens a huge opportunity. We are in one of the biggest buyers' markets we'll see in a long time. You should use this to your advantage, and here are a few things to keep in mind as you're shopping around.
We have a very saturated market right now, in every city in the US. Many people bought homes they could not afford and are now forced to sell them. This is even more true if they've already bought a second place and need to get out from under two mortgages. It's the old supply-and-demand. While supply is up and demand is down, you (the buyer) get to enjoy a low price.
When you've found a home you're interested in, you should always low-ball the seller. When I say low-ball, I mean 20, 30, even 40% below asking price! What's the worst they can say to you, "NO"? If you're using a realtor, you won't even be talking to them directly. It will be your realtor hearing yes/no from their realtor. You'll kick yourself latter if you don't try.
As the saying goes, "You'll never know if you don't ask". Not every seller can afford to come down on price, but in today's market, most don't have a choice. And don't fall in love with the first home you find. Odds are, there's one right down the street with the same layout and same quality. If the first seller doesn't come down, the next will. If you push hard enough, and wait for the right seller, you will be able to get one at least 20% below asking price!
Realtors will be your best and worst friends. No doubt you'll need them to find homes and shop around. And they'll be a big help when it comes to paperwork and things first-time buyers aren't aware of. But remember, they work for themselves, not you.
A realtor only gets paid when he/she closes a deal. They get nothing out of showing you the options or helping you negotiate. In fact, they get paid more if they don't help the buyer negotiate. Realtors get a percentage of the sale price, so it's in their favor to close at a high price. Realtors will negotiate though (and they know how to do it) because they're afraid of losing the sale. You just have to push them to it and make sure they understand you'll walk if they don't get you the right price.
Most realtors will tell you you're doing well if they can get you 3-5 thousand off the asking price. You should laugh at this! It's your money, not theirs! Tell them if they can't get 20% off the asking price, you'll find a realtor that can. Realtors are just as saturated as houses now. You have your choice of both!
Banks, just like realtors and sellers, will compete for you. They're hurting for business also, and need to sell loans. Talk to several banks about getting a loan, don't just go with the one you're realtor recommends. Tell bank A what banks B and C are offering, and vise-versa. They want your business and will lower their rates to get it. Also, as you do this, make sure they lay out all the hidden costs and are very clear about each and every closing cost. Banks use this to compete because these costs aren't always transparent and they're easy to hide while advertising a low rate.
You should start by having your realtor look up "comps", comparable sales in your area. You can also find these at the public library or online in most cases. Property sales are public record and your county will provide this information to you for free.
When you look at these "comps", you want to make sure the price you're willing to pay is well below others in your area. You never want to have the most expensive place, because you will have a hard time reselling it. A good practice is to make sure your purchase price is sufficiently low enough that should you have to sell soon and pay all the realtors fees (typically 6%), you would be able to sell at a competitive price to the rest of the market and still come out ahead. Because of this (and you want a small cushion), try to purchase your home for at least 10% less than you think you could get in a resale.
Preparation and Patience will be your biggest friends in this journey. Know what you're getting into. Know that as a seller, you're in control. There are far too many houses, realtors, and banks out there for you to settle on the first one you come across. You should be happy with each and every aspect, or you shouldn't buy. You are the customer, and these people should work hard to get your business. Tell them upfront what you expect and they're more likely to live up to it. It may take a little while longer, but you'll save a lot of money.
This can be a stressful process for a lot of people, but it shouldn't be. It should be fun! It's your money, and there are plenty of options out there! Don't listen to the hype about buying now before prices go back up, and you won't be able to find something as nice as this one. It's just a realtor or bank trying to make their commission. Prices and interest rates will be down for the next 12-18 months, and you'll be surprised how many houses will fall into your "dream house" category. Be patient and ask lots of questions. You'll be happier in the end.