Real Estate 2007

Here we are in January again, and as I have been telling you for years, January is often an excellent month to make your buying decision. The holidays are over, the supply of homes to choose from is ample, and sellers are often getting anxious if their homes have been on the market for a while.

This January is especially good timing for you, as along with a favorable supply from which to choose and a rather strong economy, you have the added bonus of interest rates being below 6%. Before we get into the financial aspects of making the purchase, let’s consider the process.

House hunting has actually never been easier. Technology has seen to that. Realtor.com and real estate company web sites have given the public access to information that was once only available to real estate companies with memberships in the multiple listing service (MLS). Historically, it worked this way: you scanned the newspaper or listing magazines, found a home that caught your attention, called the agent and went to see it. This process may then be repeated next week with a different home and different agent, until you were able to find a suitable property. This was a laborious process at best, that was improved somewhat by the selection of an agent to do the searching for you. However, there was always the nagging question of whether the agent was finding everything, which is a fair concern, given the fact that buyers often purchase something completely different than what they described to the agent. At times, the agent becomes discouraged by the length of time it is taking for you to find a home and moves on to another buyer who might have greater motivation.

Today this has completely changed. Through real estate company web sites and a concept known as IDX, participating companies give one another permission to put each other’s listings on their respective web sites. Therefore, if I am surfing through ABC Realty’s web site, I will see ABC’s listing, but also XYZ’s as well as most others. This will, in effect, create a form of one stop shopping. In this way, I can view the entire listing inventory, without having to contact dozens of different agencies and agents.

It is still critical to select a good agent that is going to work with you during your house hunt; two heads are better than one. Although you can peruse the existing inventory, your agent will have access to new listings more quickly than you will. This is an important point, once you have exhausted the current inventory and have not found a suitable home. You will anxiously await the new listings daily, as will everyone else for a similar property. Further, by sorting through the listings yourself, you may find homes acceptable to you that your agent, under your direction, wouldn’t consider. I can’t count the number of times I’ve sold property that was completely different than what the client described initially. A simple matter can change the outcome. Let’s say you adamantly told your agent that you would not consider a home without a detached garage. So when doing their property search, they didn’t consider homes without garages. However, in your search, you came across a home with no garage, but ample space to build one and a price favorable enough to allow for that. In this case, teamwork found your dream home.

Let’s consider the mechanics of how this works after you’ve found the house. Your buyer’s agent will be counselor and confidante. You can feel comfortable sharing confidential information with your agent, knowing that they are charged with keeping that confidence. They will assist you with your offer and then handle the peripheral issues. Most offers are subject to mortgage and inspection contingencies, and your agent will guide you through this to a successful settlement of the property.

Now, let’s take a moment to discuss mortgages and why this January is a fantastic time to nail down your purchase. As I am writing this, the 30-year fixed rate is as low as 5.75%, and here is how this impacts you. At this rate, the principle and interest (P&I) payment on a 30-year, $200,000 loan is $1,167. If the rate were 7.125% (about where I thought we would be) the P&I payment would be $1,348, which doesn’t sound like a lot. But over the life of the loan it is an extra $64,957, and it is important in another way. Lenders allow you to spend about 30% of your gross income on your payment. So let’s say you earn $47,000 per year, at the $1,167 payment you qualify, at $1,348 you don’t. These super attractive interest rates allow you to not only get into the house of your dreams, but also, perhaps qualify for more house than you may have thought possible.

So, make the most of January and good house hunting.

Gary Straub is an independent real estate consultant and real estate professional for 36 years.