Buyers and Sellers, Prepare Yourselves

Here comes another spring market, with an exciting if unique (at least unique in recent years) twist. It has been years since we’ve had anything but boring old market equilibrium—enough buyers to satisfy the market, and enough sellers to satisfy the buyers. Interest rates that everyone could live with, and a wild array of mortgage products to suit everyone, even to the point of devastating the mortgage industry and perhaps the economy along the way.

This year will find a very good market without the madness. There are lots of homes from which prospective buyers may choose, and still a respectable number of buyers available to satisfy most sellers. There are certainly a sufficient number to save us from a lopsided buyers’ market which would cause values to stagnate.

Interest rates are still historically fabulous, right around six percent. The Fed’s actions to lower interest rates haven’t really had the dramatic effect anticipated, as the markets are so skittish that any sort of unfavorable economic news sends markets reeling.

Buyers seem to be tentative, and who can blame them with all the unsettling news about the real estate market? So I’ll say this one last time: Pittsburgh is not Florida nor California. There is no national real estate market—only local markets—and the markets surrounding the Pittsburgh area are just fine. People refer to the decline in the market, but did you know that there was actually an increase in homes sold in Pittsburgh’s northern communities in 2007 compared to 2006? Just a 1.1 percent increase, but that is NOT a decline.

In any event, I believe that too much is being made over this subject. Your house is your home first, then an investment—and a long-term investment at that. History shows us that even when real estate markets don’t fare too well, the losses are made up over time. Real estate is a non-renewable resource, and I think we all know what happens to the value of that stuff. At any rate, what is the alternative? Rent? If you are paying $1,000 in rent, over the next five years you will lose $60,000. I’d hazard a guess that your real estate purchase won’t do that badly.

So let’s get started. If you are a real estate buyer, you need to begin aligning your professionals. Do this, and in this order. Find your mortgage professional and secure a mortgage pre-approval. You need to know what you are qualified to purchase before you begin looking. Nothing would be worse than finding your dream home and then learning that you don’t qualify to purchase it. Look around a little, ask friends and family who they used, and don’t just shop the rate. A very wise mentor of mine once said, “The best rate is the one that closes.” Believe me, there are any number of mortgage providers who will offer things they do not have and promise things they cannot do. So take a little care here.

Next, find your real estate professional. Too many buyers don’t put any thought at all into the selection of the person who is going to provide the counsel upon which the largest purchase of their lives is based. Once again, a referral from folks you trust and who have gone through this before will no doubt be best, but in lieu of that, ask some critical questions. How long have they been doing this and what is their support system? There isn’t anything wrong with a new agent—they may be loaded with energy and enthusiasm-- as long as they have a team behind them. Get to know them personally; have a face-to-face meeting. If they seem a little green, ask to meet their manager or mentor, or whoever is going to oversee their work. I’m a huge believer in instinct, and if you get bad vibes from this meeting, walk away. There are literally thousands of agents available to you, and you will find one in whom you can have confidence.

Finally, get a line on a good home inspector. When the time comes, you want a thorough inspection, not one that is going to recommend another series of inspections. And remember, you are looking for major conditions; important defects, not minor irritations. Unless you are building a new home, there will be issues to address, but don’t use the home inspection as leverage to renegotiate your offer because of dripping faucets and missing switch covers.

Again, ask around. You aren’t the first person to need a home inspection, so depend upon your personal resources. Ask your agent; they can make suggestions as well as provide you with inspection company literature from which to make your choice.

When possible, I think it is a good idea to negotiate a warranty with your purchase. One-year home warranties are commercially available at the cost of between $300 and $400 and cover most of the things your home inspector can’t give you a definitive answer about. For example, let’s say the home has an older furnace which seems to be working; your inspector can’t tell you how much longer it will operate effectively. The warranty takes care of that, and many of the warranties can be renewed for years of security.
So depend upon your professionals and the results will be a pleasurable experience. Happy home hunting!

Gary Straub is an independent real estate consultant who has been a real estate professional for 36 years.