A Buyer's Market? Lenders Permitting
Saturday, March 24, 2007
Once upon a time, would-be home buyers had to outbid each other and forgo inspections to get the place of their dreams. Now, sellers are the ones making concessions.
"The buyers are in the driver's seat," said John Eric, a real estate agent with Long & Foster in Arlington.
But not completely. The real estate boom that ended in 2005 was driven partly by lenders' willingness to give money to people with blemished credit or with no money for down payments. Nontraditional loans, such as adjustable-rate mortgages with low introductory interest rates that increased dramatically after two or three years, became popular.
With foreclosures now at a record high, banks are once again getting picky.
"It's not just a buyer's market," said Leon Bailey, a real estate agent at Exit Powerhouse in Prince George's County. "It's a buyers-with-great-credit market."
Real estate agents and analysts say those buyers who do qualify for mortgages should be prepared to stay in their homes for a few years if they expect to make money from their investment. During the real estate boom, many people bought homes only to flip them months later.
"As long as you're buying a home for the natural purpose, to live in, . . . having a home definitely beats renting," Bailey said.
So if you have the money and the good credit, is now the right time to buy?
Some market watchers say prices will continue to slide through the end of 2007, then start to pick up again in 2008 once inventory drops. Many real estate agents, not surprisingly, say they believe the market has already hit bottom. So yes, you might get a better deal if you wait a little longer. But you could also end up paying more if prices start rising again and interest rates increase.
Despite that uncertainty, one thing is for sure: There's a lot more room for negotiation these days.
"The market right now affords buyers a really good deal," Eric said.
With so many homes on the market, buyers can be more selective. And in many cases, they will get the home they want for less than the asking price, or with incentives such as the seller paying condominium fees for a time.
Will the seller give in to every concession? Not necessarily. Not all sellers are willing to take a loss.
Buyers "still smell blood, and they want to be aggressive in going for less than asking price, but it's backfiring on them," said Lance Horsley, an agent for Long & Foster in Friendship Heights.
"You're not going to knock $50,000 from a house, but you're going to open up an area of conversation and say, 'What can we do to make this work?' And no one will come behind you and say, 'I'll pay full price,' " Bailey said.
When preparing an offer, you should look at comparable sales from the last six months and consider the home's exceptional features, said Joseph Himali, a real estate agent at Best Address in Georgetown. You should also insist on a home inspection, which many buyers skipped during the real estate frenzy.
Buyers should be willing to walk away if it's just not working for them, Himali said. "If you can't find a home that is exactly what you want, you shouldn't buy it."