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How to Recognize a Buyers Market by Carla Hill

Are you on the search for a new home? Are you a first-time home buyer ready to enter the market? Then a buyers market is right where you want to be!

Recent years have turned many real estate markets on their heads. One-time hotbeds for rapid appreciation and booming sales have turned into areas rampant with dropping prices and foreclosures. Making matters even more complicated, is the realization that every market is different. Even neighborhoods within cities have varying markets.

How can you tell if you are living in an area experiencing a buyers market?

Key Indicators:

� More than six month's worth of inventory on the market

� Median sales price is down

� Fewer buyers on the market

� Relative large supply of homes and relative low prices

As a buyer, how can you maneuver yourself to take full advantage of a market which is stacked in your favor?

All of the market indicators translate into more choice for buyers. Prices become more negotiable. You have more homes to choose from.

One of your first steps is to hire a real estate agent. An agent can supply you with market statistics, including days on market, pricing, and neighborhood comparables. They can also direct you to home listings on the MLS.

With such economic uncertainty today, buyers are scared to venture into the market. They fear prices may drop after they buy, leaving them upside down in a home. They fear the market will not pick up for years, leaving them stuck in a home. That fear works in your favor, should you choose to buy. Interest rates are at historic lows. And buyer fear actually translates into more homes for you to choose from. It means sellers may be more willing to drop their price to make a sale.

In negotiating, foreclosures wreak havoc on a neighborhood. Foreclosures can lower values on an entire street. If a home has been sitting on the market for months, the likelihood that the seller will make concessions increases.

And even when a price won't budge, you can always discuss who will pay closing costs.

Deciding when to buy can be a big decision, but buying during a buyers market can give you many advantages over other markets.

Choosing the Best Home by Carla Hill

After weeks of searching for your next home, you now have it narrowed down to two great options. One offers a shorter commute, but the other offers more square footage for your growing family. How can you make the best choice? There are several strategies you can employ in your decision making process. Above all, be confident in your decision making abilities. "The fear of making serious decisions is a new kind of fear, called decidophobia," proclaimed by Walter Kaufmann at Princeton University in 1973. Worry and procrastination do nothing to aid the process, so buyers, be confident that you will make a sound choice.

Pro/Con list: In this case, you are deciding between two houses as your prospective home. For each house, divide a sheet of paper into two columns: pro and con. Be realistic about what the positive and negative factors would be for each purchase. Considerations could include: price, location, schools, repairs, square footage, floorplans, street noise, neighborhood value, comparables, and gut intuition.

Brainstorm scenarios: Chances are, whatever house you decided upon will be your residence for many years to come. Try and think ahead to situations that may arise in the future, and how each residence would affect those situations. Do you have aging parents that could move in? If so, then which house provides the best floorplan for this? Planning on having children? Check out ratings on local schools.

Do the math: Business executives might call this the "cost/benefit analysis." Buying a home is a huge financial decision, and while personal preferences (e.g. location, schools, square footage) all come into play in homebuying, many purchases are based on what makes the best financial sense. Discuss numbers and neighborhood comparables with your real estate agent. One home may be a smaller dollar amount, but the other may be a better deal in the long run. Some neighborhoods are up and coming, while others have come and gone. Are either homes overpriced or underpriced for their neighborhoods? Do either homes need repairs or updates?

Priorities list: Yes, you know you want the pool, landscaping, granite counters, close proximity to work, extra bath, and the list goes on. But when push comes to shove, and it might, what items are your priority, really? For some, driving a longer commute is worth having a larger house or a cheaper price. For other buyers, the exact opposite can be true.

Change perspectives: Sometimes you simply must step out of your own shoes to see a situation clearly. There are many different ways to approach this decision. You can look at it from an emotional point of view (which home do you love), an intuitive view (what does your gut tell you), and even a devil's advocate view (what if). Experts consider this the "Six Thinking Hats," introduced by Edward de Bono in a book of the same title, where you put on six different hats during a decision making process. Try and see the buying process from the perspective of your spouse, your children, friends, and even your worst enemy. Finally, be realistic in your own abilities. While the final decision rests on your capable shoulders, you should rely on the professionals that are by your side. This includes your agent, lender, attorney, and even your family. And while you are the final say, remember that you have a team to help give you information to fuel that sound decision.

5 Tips to Save Money for First-Time Home Buyers

By Dan Steward

RISMEDIA�Those who missed taking advantage of the first-time buyer tax credit but who are still planning the purchase of their first home, continue to have a wealth of opportunities in today�s marketplace. A few smart steps can save first-time buyers thousands of dollars. Here is a look at some of the ways how:

1. Don�t buy if you don�t plan to stay If you can�t commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner � even in a rising market. When prices are falling, it�s an even worse proposition.

2. Start by shoring up your credit Since you probably will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Choose carefully between points and rate When picking a mortgage, you usually have the option of paying additional points- a portion of the interest that you pay at closing- in exchange for a lower interest rate. If you stay in the house for a long time- say three to five years or more- it�s usually a better deal to take the points. The lower interest rate will save you more in the long run.

4. Hire a home inspector A home inspector can let you know if you�re about to buy a lemon of a house or warn you about potential problems. At best, you can move into the house confident that it�s in good shape; at worst, the inspector�s report can let you back out of the deal if the house has major, unexpected problems. Most typically, the home inspection can allow you to negotiate the home price to account for necessary repairs.

5. Get professional help Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.

6. Bonus Tip: Be patient Buying a home is one of the largest purchases most people will make in their lifetime. The key to avoiding buyer�s remorse is to be completely comfortable before signing on the dotted line.

FICO Reveals How Common Credit Mistakes Affect Scores

by Jeremy M. Simon

Disclosed for the 1st time, 'damage points' taken off for late payments

Borrowers already knew that late payments hurt their credit scores, but for the first time, they now know the extent of that damage.

Did you max out your credit card? Expect a credit score drop of 10 to 45 points. Declare bankruptcy? Your score will plummet by up to 240 points, and your odds of getting credit will nosedive with it.

The "damage points" data, unveiled recently by FICO, are part of the most revealing glimpse into the firm's once-secret -- and still mysterious -- credit scoring model. The new information discloses how many points borrowers' scores will drop when they make the most-common mistakes.

'Help People Understand' Scores

"I hope this information will help people to better understand FICO scores and the value for them of avoiding credit missteps. It illustrates key points such as the higher your score, the farther it can fall if you stumble," says FICO spokesman Craig Watts. "Getting and maintaining a good score isn't complicated. We all just need to pay our bills on time, keep credit card balances low and take on new debt sparingly. "

The greater transparency about FICO scores is important because American consumers' ability to get credit rises and falls with the number. FICO, the company that pioneered credit scoring, assigns consumers a three-digit number from 300 to 850, depending on how well they handle credit. Other companies also offer scores, but FICO's version is the most widely used by lenders in determining whether a consumer can borrow, and at what rate.

FICO's credit score has been around for decades, but only within the past decade have consumers gradually gained access to theirs. Though the raw numbers can be purchased, how they're figured remains a FICO secret, as closely guarded as the formula for Coca-Cola. Until Thursday, FICO revealed only broad categories of factors influencing the score, but not the number of points at stake for consumers who fail to pay as agreed. The "damage points" information, revealed in a report by personal finance writer Liz Pulliam Weston, will be made available through its Web site starting this weekend.

FICO's information shows that bankruptcy does the most serious damage to a credit score (up to 240 points), followed by foreclosure (up to 160 points) while maxing out a credit card has the least numerical impact (as few as 10 points).

Those with good or excellent credit -- so-called prime borrowers -- put more points at risk with each mistake. For example, someone with an average credit score of 680 who pays a bill 30 days late will see a drop of 60 to 80 points. But for someone with an excellent credit score -- 780 -- that same delinquency can send a FICO score tumbling by 90 to 100 points.

The Cost in Dollars

In order to show just how badly a drop in your FICO score can hurt your wallet, we spoke with members of the home mortgage, auto and credit card lending industries. We presented hypothetical scenarios of a consumer who decided to apply for a $200,000, 30-year mortgage; a $20,000, five-year auto loan and a credit card. While all the industry insiders stressed that a FICO score isn't the only factor in determining who gets credit and at what cost (other factors they cited include the borrower's debt-to-income ratio and whether they have already established a relationship with the lender), they were able to provide an idea of what a borrower who had the following credit scores could expect.

For a Consumer Who Started With a FICO Score of 780:

Following a 30-day late payment, the consumer's car loan rate would jump nearly 3 percent, costing the borrower $26 more each month.

Following a debt settlement, the consumer would pay as much as $109 more each month on a home mortgage.

For a Consumer Who Started With a FICO Score of 680: Following a 30-day late payment, the consumer would pay $41 more each month for a car loan.

Following a 30-day late payment, the consumer would pay as much as $95 more each month on a home mortgage.

Following a debt settlement, the consumer would no longer qualify for a credit card.

Some Surprised By the Details

Consumer advocates say it's important for borrowers to know what can damage their FICO scores. "If they know it in advance, they won't go out and step in a pile of doo-doo. They won't go out and do some of these things," says Linda Sherry, director of national priorities with advocacy group Consumer Action. Even experts found some surprises in today's news. "FICO imposes bigger hits than I would have thought for being maxed out or 30-days late just once, reinforcing my view that it is a cruder, blunter instrument than they like to claim. Nevertheless, it is a powerful, widely used crude blunt instrument," says Ed Mierzwinski, consumer program director for the U.S. PIRG consumer advocacy group.

Of course, knowing the impact on a FICO score and actually avoiding these mistakes are two separate things: Amid rising unemployment and other daily financial struggles, paying bills and staying on-track financially becomes a much bigger challenge for many borrowers.

"Some of these things are out of their control," Sherry says of consumers.

Additionally, as Weston points out, consumers with identical FICO scores can have different credit histories. That means the same slip-up -- such as maxing out a credit card -- could have different impacts on consumers who have the same FICO score. In the examples they provided, FICO assumed each borrower had several active major credit cards, a mortgage, car loan and student loans.

Sherry acknowledges the benefit of putting a number to a financial blunder. "I don't think we necessarily knew the numbers that a bankruptcy could apply to a credit score," Sherry says.

Helping You Make Better Decisions

While knowing the numbers may not keep you filing for bankruptcy if given no other choice, the information may help you make the best decision when faced with a bad situation.

FICO scores -- and the access to credit they provide -- are a valuable asset to consumers and supply a safety net when incomes are stretched. It's an asset that needs to be protected, Sherry says, even if job loss or catastrophic illness makes bill paying problematic.

"In that period of time, paying down debt is the last thing on your mind. Paying the minimum payment may also be the last thing on your mind, but you'll be doing yourself a big favor if you do," Sherry says.

Daily Real Estate News | Smart Off-Season Tips for Buyers

Everyone's been saying "Now's the time to buy," for quite a while, but for many who've been waiting on the sidelines, the autumn "off-season" of real estate may indeed be the right time to act.

"Anybody who is trying to sell a house going into the winter months has to be flexible, and you should be able to get good deals," says Guy Cecala, publisher of Inside Mortgage Finance. With mortgage rates at record lows and favorable home prices, buyers should be active.

Here are some tips for buyers to help ensure a successful close:

Secure Employment: Buyers must have a stable job in order to feel comfortable about the purchase and to get approved for a mortgage.

Spotless Credit: Credit scores above 720 still get the best mortgage rates, as lending remains tight. Help buyers to correct any errors on their credit reports.

Build Cash: Let house hunters know that the days of no-down-payment loans are a relic of the past. Depending on the situation, they'll need to put down at least 3.5 percent of the purchase price.

Follow Uncle Sam: Though the first-time home buyer tax credit is set to expire November 30th, there's talk it may be extended into 2010. Buyers may still be able to take advantage of this opportunity, but pay attention to the news out of Washington to see if eligibility will be extended.

Be Ready to Bargain: Purchasers are in a position to ask for a lot more if a seller needs to move. If you think the floor needs to be replaced, ask for it. "In my market, buyers still have a great deal of influence and sellers will do just about anything, assuming it is doable and legal," says NAR First Vice President Ron Phipps, a broker with Phipps Realty in Warwick, R.I.

Source: U.S. News & World Report, Luke Mullins

5 tips for buying a foreclosed home

By Holden Lewis �

5 steps to buying a distressed property

*Get preapproved for a mortgage. *Find an agent specializing in foreclosures. *Know how long it takes to sell a home in your price bracket. *Study the sale prices of comparable homes in your area. *Remember the sale is for the home as is.

Investor Report: Energy Efficiency

by Kenneth R. Harney

For real estate investors buying houses at discount prices, it could be a hot new trend. Instead of simply doing the usual renovations, paint jobs and landscaping to turn around properties for resale or rental, growing numbers of investors are emphasizing energy efficiency improvements to increase market values and cut marketing times.

In Baltimore, A-Plus Neighborhood Homebuyers LLC is now acquiring central city rowhouses -- spending thousands of dollars extra on eco-friendly upgrades they'd never done before -- extra heavy insulation, bamboo flooring and high energy- efficiency appliances and lighting.

Three thousand miles to the west in Seattle, Aaron Fairchild of G2B Ventures is raising $50 million for the Efficient Real Estate Fund, the first limited partnership designed solely to buy urban houses at wholesale prices, perform major energy-efficiency retrofits on top of regular rehabs, then turn the properties around as rentals and for-sale houses.

In an interview with RealtyTimes, Fairchild said energy upgrades, documented by before and after audits, are a key new direction for investors, "even if it sounds like non-sexy stuff."

Research studies have found that houses with high energy-efficiency ratings sell at premiums ranging anywhere from seven to 14 percent over comparable, non-efficient houses, and take fewer days on the market to sell.

He cited a recent study on Seattle-area single family houses constructed in 2007 or later and certified as "built green," Energy Star and LEED (L-E-E-D), a top energy efficiency rating. "Green" certified properties of essentially the same size as non-certified units sold for seven and a half percent more per square foot and sold 24 percent faster - an average of 38 days versus fifty.

"It seems fairly obvious that if we spend two and a half percent extra" on renovations to achieve high energy efficiency," said Fairchild, "that we will recapture much more than that" when the houses are remarketed.

"When you can show people that the house consumes less energy" and emits much lower levels of greenhouse gases -- and you've got pre-renovation and post-renovation audits and operating numbers to prove it, "it only makes sense the property will have a competitive advantage in the marketplace." Fairchild's program is targeting houses in Seattle that can be acquired for 25 percent below current market value, primarily through short sales, bank-owned and pocket listing situations.

The renovations are intended to drastically lower energy usage and carbon emissions, and offer Energy Performance Scores from independent auditors.

Fairchild believes small and large-scale investors who ignore energy consumption and carbon emissions "are missing an important opportunity," not only for profit, but to do the right thing for the planet.

No Money to Buy a Home? Try These Savings Tips

by Phoebe Chongchua

For many people, buying their own home is still the American dream. Yet, it remains out of reach for a lot of people, even though the housing affordability index in many areas of the country is as good as it's ever been. But if you're not prepared to buy a house, then the index doesn't mean a thing to you except, perhaps, to create a painful sting and a constant reminder that you're missing out on a good opportunity to buy real estate at lower prices. For more on affordability, see my column, Housing Most Affordable: May be Time to Move from Renting to Owning.

That's advice that many experts are giving to those who are planning to stay in the same house for a few years. The cost of buying and relocating in a short period (a couple years) can make the concept of buying not appealing or cost effective. But if it's for the long term, owning can make perfect sense. But what if you're a first-time buyer or you haven't owned a home in a while, how do you prepare for what is often the largest purchase you'll ever make? Buying a home isn't that difficult but it does require you to make sure that you're in the right financial (and emotional) position to do it. How do you get there when so many other expenses often take precedence? Simple but not necessarily easy steps can help you position to transition from renter to home owner. It starts with getting familiar with your financial picture. If you are aware of what lenders are looking for before you apply for a loan, you'll have a greater chance of getting it and it'll be helpful when you meet with your real estate agent. No time will be wasted looking at homes that aren't in your price range. You will have a clear-cut idea of what you can afford and then you can confidently look for the most suitable home.

Take a keen look at your budget. This presumes that you have a budget. If not, develop one. You can use numerous software programs to create a budget; many are free, or you can even use a basic spreadsheet. If you're self-employed, take a look at free online bookkeeping software offered by It can help you track your income and expenses for your business allowing you to create a better recording system to help you save time and money. Review credit history. If you have no idea how your credit looks, then it's time to give it a review. When you take a look at your credit report, you will be able to see if there are errors or dings from late payments that are negatively affecting your credit score. This gives you a chance to dispute errors or work to clean up your credit before you apply for a home loan. When I reviewed my credit cards, I found a few hundred dollars that had been automatically billed to my credit card in erroneous subscription fees. Your credit card can file a dispute with the companies and credit the funds back to your account. It pays to double check; you just never know what you'll find.

Redistribute your money. Don't think of it as cutting back, but rather as moving your money from one place to another. For example, if you're spending $3 on a specialty coffee five days a week, think about making your java at home and putting that $15 a week into an account that is going to be used to purchase your home. It all adds up and most of the time, we don't realize how much money a dollar spent here or there can accumulate.

Another way to redistribute money is to examine your insurance policies and consider raising the deductibles. A lot of people want low deductibles in case of a loss or an accident, but you can actually save money and redistribute that money into an account that is set aside for purchasing your home. But some statistics show that the average person files a claim only once every 13 years, according to insurance broker, Michael Rice of Thomas Ward Insurance Group. So raising your deductible from, say, $500 to $1,000 can give you an annual premium savings of 10 to 15 percent. Rice also recommends paying your premium in full if the insurance company offers you a discount to do so; some offer a five percent or more deduction and you won't be charged administrative fees for periodic billing.

Keep your eye on the goal. Staying focused on the goal of buying a home will help you to remember that cutting costs now will allow you to have what you want in the long run. Our society is accustomed to instantaneous gratification so delaying the reward can be very challenging but well worth it. Owning your own home and, being able to purchase it while in a down market, is an exciting win-win.
Realty Viewpoint: If You Think You're Saving Money Renting ...

Groups Warn Seniors to Beware of Reverse Mortgages
The U.S. senior community is warming up to reverse mortgages, but the product's increasing popularity also is breeding a new crop of unscrupulous brokers, lenders, and loan agents who are taking advantage of the nation's elderly.

In general, reverse mortgages allow home owners who are 62 and older to borrow against their home equity without having to repay the money until the home is sold or the borrower dies or permanently moves out.

But the mortgages have some groups concerned. Speaking at a recent hearing before the Senate Special Committee on Aging, legislators and consumer advocates warned that, without better loan counseling and tougher government oversight, a flood of older home owners could be pressured into taking out inappropriate loans - just as millions of mortgage borrowers were persuaded to accept sub prime loans that are now going into default at a rapid clip.

"We have gone through a savings and loan collapse, a stock market bubble and are currently in the middle of a lending mess," noted Sen. Claire McCaskill (D-Mo.) at the hearing. "Our goal is to make sure that the reverse mortgages don't become the scandal of the next decade."

National Reverse Mortgage Loan Association President Peter Bell says the perceived problem may be somewhat overblown. But he concedes that some sales agents who are finding themselves unemployed due to the housing downturn could be picking up jobs in the reverse mortgage sector but may have "a different type of mentality about moving transactions through quickly."

Source: Buffalo News, Tony Pugh


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