We've all heard the old saying that "Change is the only constant." It's so ingrained in our brains that we may not even know who said that line in the first place! I seem to recall that it was my old friend, Winston Churchill. Good old Winston! He was probably the biggest pragmatist who was also an optimist. It certainly helped that his intellectual capabilities gave him the wherewithal to topple the Axis powers, and prove himself as one of the greatest military leaders the world has ever known.
How can we apply Mr. Churchill's overwhelming sense of pragmatic optimism to the real estate picture we are faced with today? Well, first and foremost, I believe Mr. Churchill would say that you have to stake your own claim in the real estate jungle. Cease capitulating to the 'herd mentality.' If you are in the market to buy or sell a home, first and foremost- figure out where you are going, and then devise a plan on how to arrive at your destination.
A recent article in Time suggests that we should ignore the headlines. I subscribe to this idea. In fact, I think if we could ignore all the media hype circulating like flies on a warm July day, we'd all be one step ahead of the game. By now, I believe we all know the causes of how the nation got in this predicament. I don't feel the necessity to reiterate what caused the real estate debacle in the first place, because I don't want to bore you. Why continue to beat a dead horse? No, the name of the game from here on out has got to be, "Where do we go from here?" Figuring out what your situation is should be the first step in devising a plan that is right for you in the current real estate market. From understanding your situation, you can go to a plan of attack on ascertaining a solution.
Let's review several different scenarios for buyers and sellers in the market right now.
The first time home buyer. There isn't a better time for you then right now! If you've been a renter for as long as you can remember, this is the time to jump into the housing market with both feet. Interest rates are low. Inventories are high. You can call the shots right now. Sellers are ready to deal. Builders are ready to throw in a lot of incentives to get you to buy. The only caveat you need to concern yourself with is the type of loan you will obtain, and how much money you'll need as a down payment. Talk to two or three different lenders to get an idea of the loan programs they offer, and what you'll need to do to qualify for the loan. If you don't have a lot of money for a down payment, ask about FHA financing. It is making a comeback right now, and you may only have to come up with 2-3% for a down payment. This is a great time for you, Mr. first time buyer. Get a professional Realtor, and go stake your claim on owning a home! Check out this article from Smart Money for some good tips for first time buyers.
The move up buyer. The move up buyer is somewhat stymied right now, as many move up buyers have to sell their existing homes in order to buy a larger home. Due to the high inventory levels, it could take quite a bit longer to sell your home. Make sure that this is something you are committed to doing, that you are motivated, and that you understand the odds of selling. It could be a long process (as long as six months to a year). In order to keep your sanity, make sure your home is priced aggressively, and presented to its best advantage. What you stand to lose on one end, you can more than make up on the other end by getting a good deal on the house that you purchase. You will want to hire an agent with a proven track record for negotiating, as it is critical for you to sell your home for as much money possible, and to purchase your new home for the best possible price and terms. A professional Realtor will have many recommendations for lenders, title companies, insurance companies, home inspectors, repair technicians, and more. Ask your agent whom they recommend, as your Realtor is usually well connected to the best people in the industry. Using companies that offer 'one stop shopping' with in house lenders, title companies, etc. can not only save you money, but can also streamline the process for you, making it as hassle free as possible.
The crisis seller. You are behind on your mortgage payment. You are a home seller in crisis, and you are what is known as 'upside down' on your mortgage. You may have bought your home at the top of the market, and financed it with a subprime mortgage. Now it's worth considerably less than what you paid for it, and you owe more on the home than it is worth in today's market. You have no choice but to try and get out from under the mortgage that has become impossible for you to maintain. The first thing you need to do is to talk to your lender to figure out what your alternatives are, and how the lender can help you. The lender does not want to have to foreclose on you. Lenders lose a great deal of money in a foreclosure, so talk with your lender. It is possible that if you had an exotic loan product (negative amortization, adjustable rate, or interest only) your lender may either freeze your interest rate (usually at a rate that is higher than the going rate, but lower than your current rate) or assist you with refinancing options. It is possible that you may be able to refinance and stay in your home. If you refinance or get an interest rate freeze and can afford the payment, then you should consider staying in the home. If that is not an option and you must sell, then get a Realtor who understands short sales, as this is probably your only opportunity to avoid foreclosure.
The unmotivated seller. This is not a market for unmotivated sellers. If you are an unmotivated seller, then you have no business putting your home on the market. It's that simple. If you aren't motivated to sell, then stay put. If you put your home on the market at an inflated price, all you are going to do is create frustration for yourself, and enable your neighbor (who is priced with the market) to sell his home. Three years ago, a lot of unmotivated sellers were selling their homes. A seller's market will allow for unmotivated sellers. But there is no place for you in a buyer's market. So, save your time and aggravation, and if you don't need or want to sell your home, then don't waste your time putting it on the market.
The moving out of town seller. Usually you are a motivated seller, as more than likely you need the equity from your current home to buy your new home (see move up buyer above). If you have to move before your house sells, talk with your agent about staging the home. Vacant homes are more challenging to sell than owner occupied homes, as buyers are visual, and many times they need to see furniture placement to be able to picture themselves in the home. If your home is vacant and on the market, make sure that you have an agent who will be checking in on your home on a weekly basis. You'll also want to make sure that you have a landscaper and a cleaning person keeping the home in top condition, as it needs to be presented in its best possible light in order to stand out from competing properties. This article from Yahoo has some great tips for you to consider.
The investor. The investor buyer and seller has dried up a lot since the air came out of the market. If you are in the market to buy an investment property, there are several factors to consider. 1) Cash flow. Don't buy the property if it doesn't have a positive cash flow. Many 'investors' (who were really speculators in an investor's clothing) bought at the peak of the market, banking on appreciation only. Appreciation is a bonus! If you're going to invest in residential real estate, make sure you have the stomach for it. Some of the things you are going to have to deal with include vacancies, problem tenants, repairs, repairs, and more repairs! If you aren't up for this sort of investing, you may prefer to stick with the stock market. If you're selling your investment property, make sure that you are being realistic as far as pricing, property condition, and showing. This is a good time to buy an investment property if you find one that you like for your portfolio. Just remember that it needs to have a positive cash flow! This blog has some great info for would be first time investors.
All in all, considering that 'change is the only constant,' it isn't as grim in the real estate jungle as you may believe after reading the plethora of media naysayers. The main thing is to grin and bear it, and don't believe everything you read in the media. Keep your chin up, keep a positive attitude, and more than likely everything will fall into place, should you decide that a move is in the cards for you this year. Please call me if you have any questions about this article, or about the Tucson market in general.
Written by Sarah Ley
BSBA, ABR, CRS, CNHSA
Tucson Realtor with
Long Realty Company
(520) 404-0544
http://www.sarahley.longrealty.com/
sley@longrealty.com
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