When deciding to buy a home, it is a good idea to monitor the real estate market. A competitive real estate market, where the number of listed homes are scarce and the costs are skyrocketing, are unfavorable to buyers. The real estate market is known for its cycles of booms and busts. When the demand for housing exceeds the supply, mortgage lenders have a field-day and charge borrowers stiff rates for their home loan.
Even though predicting the real estate market is impossible, it helps to monitor its patterns. Generally speaking, the economy determines to a certain extent whether it is a good time to apply for a mortgage or if it is worth waiting. Monitoring the real estate market can get complicated and even the greatest economists spend aching months to try to come up with a comprehensive prediction. Nonetheless, you have plenty of resources on the web to help guide you through the process.Buyer's Market
If you are going to buy a home, the prime time to invest is when it is the buyer's market. When the number of home sales fall, correlatively, home prices tend to fall as well. The buyer's market comes about when there are more homes listed for sale than there are home buyers. There is a general agreement that if the same inventory of homes have been on the market for sale for over six months, then it is a buyer's market. Basically, it is easier to negotiate a better deal if the home has been listed on the market for a long period of time, and the seller has already tried reducing the price of the home yet failed to sell it.Why its a good idea to buy a home in a Buyer's Market:
In a buyer's market, the sellers generally have a difficult time selling their home, so there is more leeway for buyers to make more demanding requests. Sellers in a buyer's market are more flexible and willing to work with the buyer in lowering the home price because they know that there is a good chance that they will not receive another offer. Thus, buyers will have more bargaining power. Sellers will be more likely to compromise in negotiating the deal for your home purchase. Home buyers can ask sellers to pay for some of their closing costs. Buyers can also ask the sellers to provide for things like special inspections, roof certification, or a home warranty.
It is probably even possible to find that sellers are more willing to accept a conditional/contingent offer. Meaning, for example, that the buyer may make an offer that is contingent/dependent on whether or not the buyer can sell his existing home first (this is highly unlikely in the seller's market).Seller's Market:
In a seller's market, there are more buyers than there are homes on the market for sale, so most of the homes listed on the market will sell fairly quickly. A rule of thumb is to see if there is less than four to six months of inventory on the market.Why it's not always a good idea to buy a home in a Seller's Market:
In a seller's market, you are probably competing with a number of other buyers for the same home. It is not uncommon to find that the seller is considering his options while reviewing a number of different offers that are not your own. Sellers are disinclined to pay for anything that they don't have to, so you will have difficulties convincing them to pay any of your closing costs. Sellers wont wait for you to sell your home if there is someone else making an offer to close the deal sooner. Basically, the competition is fierce among buyers in the seller's market, and it is tough for buyers to negotiate a great price when there are several other buyers vying for a limited supply of homes.
Obviously, it is in your interest to be the one with the advantage when bargaining for a low home price. However, don't be too discouraged if you walkaway feeling unsatisfied with the outcome of your first meeting because when buying a home, placing the initial offer on the table is only the first encounter in an ongoing skirmish of negotiations. Negotiations can last a long time.
Remember that you still have to take care of appraisals, home inspections, etc. Plus, it takes time to complete all your mortgage transactions. During this time, the seller may have already found his new home, scheduled movers, and applied for a mortgage. Keep your head up; the upper hand gets passed back and forth between the seller and the buyer throughout the this long process.Maintain control. Act with tact.
Both you and the seller will have to put up a composed front of indifference even though both your homes are on the line. Desperation and emotional outbursts should be controlled. A new home is a hefty investment, so take controlled, rational steps throughout the entire home buying process. Asses the seller's position. Know the real estate market, etc. This can only be done by diligent research.
Both the seller and buyer should be equipped with as much information as possible. Don't be left in the dark. Take proactive measures to know what you are up against. The most talented negotiators are the ones who are able to get what they want and leave their opponents grinning at the bargaining table. One way to accomplish this is by placing an honorable offer at the very start of the process, and by "honorable offer," I mean a price that is a bit more than what you wish to pay. By offering the seller a fair price, you have gained his attention and perhaps a bit of his trust in your character. Try not to irritate the seller with an offer that is far below his asking price. Once the seller has taken notice of your offer, then add a list of things you would like the seller to address. The closing costs can get steep, so add some of those closing cost items onto your list. Ask them to fix the roof, paint the walls, fix the doors, the list can go one however you please.Know when to walk away
You must be prepared to walk away at all times. If you have a gut feeling that you are not getting a fair deal, don't buy the home. Your home purchase may be the largest investment you will make in your lifetime, don't make a rash one that you'll regret. You may not get a callback with a better deal from the seller after you've walked away, but ending the negotiations in a cordial manner usually raises the chances of getting that second call with a lowered price.
Generally, if you are a first time home buyer, you may want to consider getting some assistance from a qualified and reliable real estate agent.Who is the real estate agent working for?
Unless you hire a buyer's agent, you should assume that the real estate agent is working for the seller, not you. Meaning that when you come across a home you like, and contact the real estate agent about that house, the agent will have the seller's best interest in mind. This is why it is a good idea to turn to a buyer's agent when searching for your new home.What do buyer's agents (i.e. buyer's representatives) do for you?
Buyer's agents are pretty much hired to assist you through the entire home buying process. You will be faced with several questions when buying your home, so (ideally) an experienced and qualified agent should offer you his or her extensive knowledge of the local real estate market and should be able to guide you in the right direction as to which home is right for you. Buyer's agent are hired to find the homes you can afford in the locations that can meet your needs. They will help you calculate the market value of the homes you may be interested while they maintain their confidentiality and loyalty to you (and not the seller) during the price negotiations process. They will provide you their professional opinions in regards to what you are buying by telling you both the upsides and downsides of buying a particular property. Nonetheless, just like any other contractual relationship, you should review your buying agent's qualifications and experience prior to hiring him or her.Advice on finding a buyer's agent (i.e. buyer's representative) that is right for you.
Many buyer's agents are referred to by trusted family members, friends, or coworkers.
The internet is also a great resource. Google the top real estate companies in your area, and find a list of experienced buyer's representatives in your area of interest. Look up the profiles of individual buyer's agents: More experienced agents will proudly divulge all their accomplishments, while the newer agents will not. A great place to start your search may be with the Real Estate Buyer's Agent Council of the National Association of Realtors. Also, if you have a good idea as to where you would like to find your new home, you may want to search for local agents that are located within the area. A buyer's agent who has experience within your potential neighborhood will be more knowledgeable about its current real estate market.Real Estate Agent v. Realtor
Many are unaware of the fact that there is a distinction between real estate agents and realtors. Although real estate agents and realtors are all licensed to sell real estate properties, not all real estate agents are Realtors. Realtors are real estate agents who have become a member of the National Association of Realtors. Realtors pledge to follow the (strictly enforced) Code of Ethics that call for an even higher standard of conduct than what is required by law. Only about half of all real estate agents carry the title of being a realtor.