3 Things for Homebuyers to Do Now
All real estate is local but it looks like, in the country as an aggregate, we're going to have a decent spring market. The projected expiration of the first-time homebuyer tax credit in June (but you have to be in contract by April) should drive sales. Also, prices aren't bad: "It now costs less to own than it has in well over a decade on a mortgage-payment-to-rent basis," noted Wall Street Journal blogger Nick Timiraos in a piece on renting last week.
So now that we have the Interwebs -- and even apps that show listings on our mobile phones -- buyers can just pick their home out of a catalog, right?
Wrong. If you're going to be careful with your money, make sure you do these three things:
- Pencil out your purchase at interest rates 3/4 of percentage point higher than they are now. If your mortgage lender is quoting you 5 percent, run the numbers at 5 3/4 percent. No one has a crystal ball as far as interest rates, but there's a risk that they could begin to creep up while you're shopping. Better to think through your budget before you fall in love with that target property.
- Get a sense of prices in your area -- and by that I mean sold prices. The biggest mistake buyers make is to take list price seriously. I hang out on real estate chat boards all the time -- it's part of my job -- and every time I see someone say, "they got that house for a steal, it sold at a 15 percent discount!" I want to slap them. List price is a number that the seller made up, and you invest it with too much power at your peril. On the other hand, if you want a three-bedroom house, and you know what three-bedroom houses in the area have recently sold for, that's valuable pricing information.
- Go see a home that's different from what you think you will like. Try a different target area, or maybe just a different style of house: If you're crazy about Colonials, go to an open house for a raised ranch. Being open to new ideas may help you find your dream home in a place you never thought possible. If not, it will help you confirm your existing biases -- in which case you can purchase with a light heart.