Strategies for Buyers and Sellers in Today’s Market

Buyers and sellers both need a competitive edge in today’s tough real estate market. A recent Parade magazine article offers solid strategies for both parties right now.

Whether you are looking to buy a home or hoping to sell one, you can make the best out of today’s real estate market if you go about it the right way. Here are strategies for success for both buyers and sellers.

If you are a buyer…

• Make yourself a good risk. Everyone knows that lenders are tightening their standards after years of risky lending practices. To get a loan today, you need to be seen as a solid risk. Your credit score will determine the interest rate a bank will give you on a mortgage, and a few points that lie between good and great credit can make a difference of tens of thousands of dollars. There are many ways you can improve your rating before applying a loan, such as paying down debt. Lenders want to see that your debt doesn’t exceed 30% of your available credit. In other words, if you have $10,000 of available credit, you should not have more than $3,000 of debt. But don’t close an account once you have paid off your debt, as you could actually hurt your score.
  
  
• Buy within your means. Many banks now require a down payment of 20%, but some might accept 10% if you are an attractive borrower. Remember that the less you put as a downpayment upfront, the more you will pay in fees and interest. You also need to plan for home expenses; experts recommend paying no more than a third of your total pre-tax income on your mortgage, homeowner’s insurance, maintenance and property tax. You can plan for maintenance being about 1% of the value of your home each year. Before getting carried away with visiting open houses, make sure you can afford these expenses.
  
  
• Be choosy about your loan. You’ve heard the horror stories of foreclosures and high-risk loans, so don’t join the ranks of homeowners who take out an adjustable mortgage with a low interest rate that later becomes unaffordable. Your best bet is staying safe with a 30-year fixed-rate mortgage. Even the adjustable-rate mortgages that are available don’t offer the great rates they did during the height of the real estate boom. Do your research on your loan. The Internet is a great resource for articles and statistics, and will help you find the best rate in your area.
  
  
• Go low. When making an offer, don’t offer at the listing price. Bidding wars are mostly a thing of the past in today’s market, and most sellers anticipate having to drop their prices. Make your first offer a low one and see if the seller will come down.

If you are a seller…

• Think twice. This is possibly the most important advice to sellers. If you don’t have to sell your home, it may be better to be satisfied with some inexpensive home improvements and wait until the market improves. If you have to sell now, don’t expect big returns.
  
  
• Partner with the best agent. In past years, houses were mostly “selling themselves,” so sellers could reasonably ask agents to cut their commissions. Today, you are well-advised to pay the full 6% commission so you will get the best agent out there. Local agents are best, as they know the market, the selling points of the community and can quickly become familiar with your home. They can also be available to show it to a buyer on short notice. Check out a few agents to determine which one has the best experience and skills for your needs.
  
  
• Set the right price. If you choose a good agent, he or she will help you understand what price will get the best response from buyers. Studies show that buyers are sensitive to psychological limits or break points. For example, a buyer with a budget of $300,000 may be willing to pay $299,000 but not $301,000. If your home is valued at $350,000, consider listing it at $340,000 or even $339,000 to maximize its appeal.
  
  
• Anticipate the future. Pricing in the current free-falling market is more of an art than a science. In discussing helping his parents sell their condo in Las Vegas, Nevada, Brad Inman, publisher of a real estate trade magazine, explains, “We had to anticipate how much prices would fall in the time it would take to close [30 to 60 days].” The market value of his parents’ condo was $185,000 to $195,000, so he priced it at $179,000 and accepted an offer of $175,000 while other properties languished on the market. “You want to avoid time on the market to stay ahead of the falling knife,” he says.

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