10 Tips for the 2010 Home Buyer

As much as we would like to say that the wave of foreclosures is almost over, it appears that it will be around for some time yet. Though foreclosures are harmful financially, emotionally, and socially for the home-owners, the communities and the economy, there has been one silver lining and that is the opportunity some new home owners have had in being able to purchase their new homes at fantastic prices. If you are considering purchasing a new home in this current market, here are some tips to help prepare you if you come across bank-owned homes in your search.

1.) Dress warmly. Between October 15th through April 15th, many banks “winterize” their listings. This means that they turn off the water at the street level and turn the heating system completely off. It is not uncommon for the home you are looking at to be colder than it is outside. (On a positive note, we have seen more bank-owned homes with heat on this year than the past three years).

2.) Be patient. Often, banks do not act as quickly as we would like them to. It is not uncommon for them to take several days to respond to your offer, several more days to get signed paperwork, and even a few more days to get the utilities on so that you can perform an inspection

3.) Understand the market. Bank-owned homes are typically listed for far less than their human owned competition. There are plenty of buyers looking at these opportunities and it is not uncommon to find yourself bidding against at least one or more potential other buyers. An aggressively pried bank-owned home can easily sell for well over the list price in just a matter of a few days.

4.) Do not count on things happening on time. Often with bank-owned homes closings are delayed. Banks will charge the buyer a per diem fee if the closing is delayed due to the buyer not being ready, however most delays in closings are due to the bank not being ready. Be sure to allow yourself a time buffer from when you close and when you need to be out of your current place. Line up your moving truck after your closing is completed. If you are trying to take advantage of some of the tax incentives, be sure to leave time buffers with the deadlines associated with this as well – Currently, purchase agreements need to be completely signed by all parties prior to April 30th, and closings need to take place by June 30th.

5.) Don’t get too wrapped up. Buy a home because it is the right one for you, not because you want to get the government incentive. Though the incentive is great, this is still one of the biggest purchases you will make, and it needs to be thought through carefully.

6.) Be prepared. Most bank-owned homes have a lot of deferred maintenance, will need thorough cleanings, new paint and carpeting, and new appliances. You will be required to purchase the home “AS-IS,” so a buyer’s inspection is even more important than ever. Make sure you have a good understanding of what the home will need after closing to make it function for you.

7.) Don’t exclude the human owned homes. Many people selling in this market are being very competitive with the bank-owned listings. They know that to compete they have to offer a great price and have their home in terrific condition. Many buyers who start out looking at bank-owned homes come to the conclusion that they would rather pay more a month in mortgage payments than come up with thousands of dollars and many hours to make their new home habitable. For every $1000 dollars your mortgage increases, your payment goes up just a little over $5.00 with the current rates. So, for example, going up $20,000 in price may cost you only $100 more per month. So, be sure to look at the big picture and determine what works best for you.

8.) Plan ahead. Have a budget, live within it, and have a reserve for the unexpected. If you qualify for the buyer incentives put a good portion of that into a savings account. We all look forward to the day that bank-owned homes are relatively rare again, and having a few mortgage payments in a savings account can make the difference for you if there is a loss of employment or an unexpected expense or health issue.

9.) Enjoy the process. Buying a home should be fun and exciting. It is also stressful, but ultimately your patience and hard work will pay off.

10.) Use a Realtor. In the State of Minnesota, we have buyer representation, and the Broker’s commission is almost always paid by the seller. The agent you hire has fiduciary duties to you to work in your best interest always and they will be able to help you navigate this process that has changed so much in the past four years.