Avoid These Mistakes That Homebuyers Make!

It's still a buyer's market...and if you are thinking of buyer a home, consider these common mistakes that many buyers make.  A good Realtor will counsel you to avoid them:

*Use the same agent that lists the home you want to buy.  This arrangement can work, but know that the listing agent's loyalty is first to the seller of the home. As a buyer, it's better to have your own buyer's agent working for your best interests.

*Fail to have a home inspection.  The money spent for a home inspection is well worth it--especially if you use an experienced home inspector. On the other hand, don't get too concerned about every little item that needs repair on the report.  Home ownership requires maintenece--determine what are the most important repairs first, then plan to take care of the other smaller issues within the first year or so.

*Compare mortgage lenders and their closing costs.  Know the difference between a mortgage banker and mortgage broker.  Shop your loan around to a few lenders and compare costs.  Be sure you know the terms of the loan and why some banks charge certain fees and others don't.  Is it better for you to pay PMI or structure the loan differently?  What's the difference in payment between a 15 and 30 year loan? Take the time to talk at legnth with your lender and explore the best way to structure your loan.

*Make a lowball offer to the seller.  There are considerations here-if the house has been on the market a long time, if the seller is saying 'bring all offers'--sure, why not go for it?  But if the home is relatively new to the market and is price right, a lowball offer will just upset the sellers and set the stage for uncomfortable, uncompromising negotiations.

*Don't get a copy of the Homeowners Association Deeds and Restrictions.  This is especially important for newer subdivisions.  Write it in the contract that you want a copy to review --and do so before the end of the inspection period. You may have plans for the home that are subject to certain rules (for example, fencing in a yard or certain colors of house paint).

*Bring too many others into the buying process.  Sure, you can get another opinion from family members and friends about the house you want to buy--but take their opinions objectively.  It is human nature to pick apart the negative aspects of the home--and all homes have them--but concentrate on the positives and if this house has (most) everything you want--trust your gut feeling and go for it.

*Talk to the neighbors.  This is more subjective, but is something I always try to do for my buyers.  Neighbors will tell you a lot:  is the block friendly, does everyone know each other? Are there neighborhood get togethers? Do the homes tend to have water in the basement? What's the traffic like?  Most neighbors are happy to share this information. After all, everyone is curious about the 'new people who bought the house'!

I could think up several more examples, but these are some basics to keep in mind as you search for a home.  It's probably the biggest investment you will make--take your time and be well-informed!

Kansas City Area Home Sales Statistics-April 2008

Here is a summary of April residential home sales stats for Jackson and Johnson County.  Overall, still very slow compared to one year ago but inventory has not had a sharp increase...listings are down, reflecting sellers' hesitation about selling in a slower market.

Jackson County (comparisons to April 2007)

Pending contracts: down 15%   Average Sales Price: down 19.5%

New Listings: down 8.95%         Inventory: up 2.72%

Johnson County (comparisons to April 2007)

Pending contracts: down 19%    Average Sales Price:  down 1.52%

New Listings: down 9.21%         Inventory: up .79%

Johnson County sales are still relatively strong compared to the overall market.  Average sales price has stablized since the first of the year, showing very little reduction from last year. 

Overall consensus in our office is that there are buyers, but they are very, very choosy as they look around and they expect 'a bargain' along with an updated, mechanically sound and nicely decorated home. They are also taking their time looking at everything in the market.  Interest rates are still low...a good market for buyers!  Sellers need to price their homes very competatively and don't be insulted at lowball offers. All the national press regarding the poor housing market has them thinking sellers will jump at any offer.  A good Realtor will negotiate a deal that both parties are happy with--that's the goal!

How Your Credit Score Affects Your Loan's Interest Rate

Credit scores have always affected interest rates, now more so than ever due to the credit market crisis.  Mortgage institutions can tease  you with the offer of low interest rates -- but buyer beware, there is always a hitch!  It pays to know your credit score if you plan to purchase a home--there are personalized free reports available on-line.

A 30 year fixed conventional loan offers a 5.875% rate.  Now, your credit score must be over 720 to get the best rate.  If your score is:

680-719, your rate will be about .125% higher

660-679, .375% higher

640-659, .5% higher

If you have a downpayment of 30% or more, the interest rate terms can be  more favorable.

Know your credit score.  If it's lower than you would like, due to late payments, large debt, missed payments, etc.--start work now to increase your rating.  If you plan to purchase a house, getting your credit score to a higher level over a period of  months will benefit you when you are ready to buy.  An experienced mortgage banker can offer advice and specific steps to get your credit at a better level.

I predict the housing market will stay slow the rest of the year.  If you plan to buy, start checking your credit score now!

The Art of Lowballing

The national weekend newspaper magazine PARADE devoted most of yesterday's copy to the current real estate market.  One portion  is entitled, The Best Strategies for Right Now.  Separated into two sections, one for buyers and one for sellers, most of the advice was right on the money. However, the strategy for buyers to 'lowball 'em' when making an offer deserves some additional commentary.

Even in a more balanced market, most buyers do not offer list price on a house.  There are exceptions, for example if the house is brand new to the market, if it is priced well out of the gate or is percieved as a 'good deal', if it has everything the buyer wants and more.  But in this buyer's market, I hear stories almost every day about buyers who lowball to the extreme, based on friends and family advice while not taking into consideration the experienced agent's advice.  Sure, everyone wants a deal, and buyers don't want to overpay.  A buyer's agent job is to get the best house for the buyer at the best price.  But when a buyer insists on offering a price that is so low it's insulting to the seller (and then asks for lots of free extras on top of it!), it sets a bad tone for the negotiation.  Most sellers know that in this market, the offer will not be at the asking price.  However, the smart approach is to make an offer that is workable, and doesn't immediately put the seller off. If the seller perceives the buyer's offer akin to a stab in the heart--followed by a twisting of the knife-- any further negotiations are clouded with this perception and the seller becomes defensive and hostile. 

The best negotiations are ones that start off with the approach of 'we want this to work well for everyone' and go from there.  Listen to your agent regarding a lowball offer. Look at the comps with him.  Strategize about a reasonable, good faith offer and remember, more negotiations come after the inspection. Don't always think your agent wants you to go higher so that he/she can earn more money.  Yes, we do work for commission.  But most professional agents think of the best way to get the house for the buyer and not  immediately, 'what's in it for me'.  If it's a hostile process, the chances increase the deal will not go through and then everyone loses.

I believe one reason for this slow housing market is the animosity between lowball buyers and sellers who are unrealistic about what their house is worth in today's market.  An insulting lowball offer does nothing to help both parties achieve the goal of selling the home.