Five New Rules for Home Buyers

Money magazine lists the five new rules for home sellers as follows:

Rule 1: You can't time the bottom. Face it: The house you buy today will more than likely be worth less next year. That could get you thinking about trying to time the bottom. Resist. It's harder to do than you think, and this is the best buyers have had it in two decades, with inventories up and mortgage rates low.

Rule 2: One reason to buy now - mortgage rates. Homes are plentiful and will remain so, but financing will be getting more expensive. That means there could be a penalty for waiting to buy even if prices fall more.

Rule 3: Another reason to buy - rates on big mortgages. Mortgages in amounts greater than $417,000 - the limit for buying by federally sponsored mortgage agencies - usually run a fifth of a percentage point above conventional products.

Rule 4: Don't buy cheap; buy good schools. Go for areas with highly rated schools. They generally fare better during downturns, and that pattern is holding today, according to a recent study by real estate site Trulia.com.

Rule 5: Make sure your agent has your interest at heart. The real estate game has a built-in conflict of interest, since the listing agent and your agent both get paid by the seller. And these days more sellers are offering extra cash to buyer's agents. So make sure you're not being steered to a house that's better for your agent than for you.

As you know, we're looking at homes right now (and we have been for a year.) Here's my current thinking regarding these five:

1. I have to keep reminding myself of this fact over and over. We'll be getting a GREAT deal (compared to only a couple years ago even) on whatever home we buy and we don't want to miss out on a home we really like simply because we want to buy it at the very bottom. Even if we buy now and the home declines in value over the next two years or so, it's likely that it will at least be back to even a few years after that -- especially if we buy a good home with a good location and great schools.

2. If you pay $5,000 more for a home now but lock in a mortgage rate that saves you $10,000 over the next few years, it's better to pay more now and save in the long run. This isn't that much of an issue for us as we'll put down a large downpayment, then another big chunk once our home sells. At most, we'll probably keep a mortgage for three years.

3. Doesn't apply to us.

4. See my comments on #1. This is one reason we want to move -- better schools mean better re-sale/value.

5. We have a good agent, but I don't think she's got our interests totally at heart. In fact, I don't think any agent would. They want to sell a home as fast as possible, and I'm totally aware of that. So while we have an agent that "represents us", I take responsibility for making sure we watch out for our own interests -- we don't simply assume that she will.

Comments

[abc]

Help me out here regarding rule #4--buy cheap or good neighood/school district. I could buy a 3br/2 bath condo in an "aveage" area in the Bay Area for anywhere between 200k-300K. If I wanted to buy in a top area, it's going to be 400-700K. I am buying for INVESTMENT and CASH FLOW purposes, and going to rent it out.

Of course the average district won't rise in value as quick or as much as the top districts, and the rent wont be as high. But then again, I won't be paying double the price and/or worrying about paying my mortgage if a tenant decides to bail out on me.

Any thoughts?

[Anitra]

1 & 2 are why we bought a home exactly a year ago. We're not worried about timing the market, since we bought a house we could see ourselves living in for the rest of our lives. It also happened to have the best neighborhood (and schools) of all the houses we looked at.