The Best Strategies Now for Home Buyers and Sellers

Parade magazine recently listed the best strategies now for home buyers and sellers. Since I'm potentially a buyer and a seller and am fairly knowledgeable on the subject (we've been looking for a new home for over a year now), I was quite interested in what they had to say. Let's start with their list of what buyers should do now:

• Be an attractive risk.
• Buy only what you can afford.
• Choose your loan carefully.
• Lowball ’em.

Here's where we stand on each of these:

1. I think we're sitting in a good position as we have a good credit score and will be making a significant downpayment.

2. Of course. It's part of my formula for buying a house.

3. We'll be looking at a 15-year fixed, though we plan to pay it off much faster than that.

4. Of course. Prices are certainly going down dramatically.

Here are Parade's suggestions for sellers:

• Think twice before you sell.
• Find the best broker.
• Make sure the price is right.
• Know which way the wind is blowing.

From what I've seen, many sellers are still not pricing their homes correctly. I don't know if it's because they think their homes are worth more than what the market says or if they NEED a certain amount of money out of the house and are thus pricing it high. Whatever the reason, most sellers are not "making sure the price is right." I think this is a big reason why homes listed at $500k are selling for $400k -- they should have been priced at $425k to start with!

Comments

[anon]

Maybe some sellers price high because they assume people will offer 80% of the asking price regardless of what it's worth just because "the market is down so they should lowball." If they price it right to begin with, people will often try to lowball that price too, so they might as well get 80% of a higher number (just throwing that percentage out there).

I think that sellers can also pull the same kind of gimmicks that the car companies are doing (i.e. free gas for a year if you buy this car... they are getting more $$ than they have to pay out). By this I mean you can probably get more money if you are willing to cover closing costs, provide an inspection, include some appliances, etc, and likely more than you would have to pay out. Play with people's minds and they think they are getting more than they are ;)

Another thing I'll throw out there, but people will call me crazy: Pay cash for the house. This may be more possible than you think in the current market (warning: many of you say these prices are unrealistic, so this may only apply to people in certain areas of the country or away from big cities). Most of the houses we looked at (a few years ago, before the big decline) were around $120k. We had $65k in cash to put toward the house (plus enough to cover closing costs and not deplete our other savings). Currently, the same houses are going for $90k-$100k, and by paying cash we could probably have knocked off a few more thousand. By waiting another year, you can save up another $15k and the prices may fall even more during that time. I caution you not to have so much equity in your home that you can’t withstand an emergency, but do not immediately discount the idea just because you think it’s not possible.

[SS]

FMF - I'm curious as to why you're planning on taking out a mortgage given your current mortgage free status and all your thoughts as to how great it is (btw - kudos on your plans to try to work in giving with the sell of your house, very generous).

Given your plan to pay it off very quickly, why not just start out with it paid off? Does it have something to do with the unavailability of non-retirement funds, capital gains from selling investments, or maybe just less dislike/concern with debt as your net worth has grown to a comfortable level? Sorry if you've already answered this.

[FMF]

SS --

I'm trading up and between what I have in cash and the sale of my current home, I'll be close to paying cash for it, thought I will need a mortgage during the transition time and if we need to do any fix-up/repairs/etc.