Getting Back to Basics - Fall 2009

Over the past three years we have seen a repricing of property values as well as an adjustment of attitudes. Our new real estate reality is a reversion back to the past, to the basic fundamentals of acquiring real estate. Do you remember these practiced principles?

* Make a sizeable down payment. Be prepared to make at least a 20% down payment. This will pay off in the up-cycle with higher equity, lower payments, and better interest rates. If you are purchasing a condo, be prepared to put 30% down.

* Buy within your budget. Just because you're approved for a mortgage amount doesn't mean you can afford the home. The three C's of mortgage lending are credit, capacity and collateral. Also, a safe mortgage has traditionally been one where the mortgage was no more than three times the buyer’s annual family income. Dave Ramsey says it should be no more than a fourth of your monthly income.

* Buy & Hold. The industry still has some pain to endure, and now is not the time to think “fast buck.” We still have a plethora of distressed properties to sell off, but prices are stabilizing. Your plan should be long-term. If you have investment properties, don’t forget about 1031 Exchanges.

* Know your market. Real estate is truly local. While it’s great to know national housing trends, these trends are not necessarily locally pertinent. Know your market's driving forces: comparative sales in specific neighborhoods, local job outlook, distressed properties sales, average percent reduction from list to sale price and price changes. These create a local story that needs to be understood.

* Watch for signs in the next cycle. From 2000 to 2005, U.S. property values increased by an average of 53%, with many markets far exceeding that, including California at 109%, Nevada at 94% and Florida at 90%. That party ended abruptly, and the ripples are still being felt. Continued home-price run-ups year after year should raise a big, red flag.

The Fall season looks to be very promising especially if the $8000 Tax Credit is extended. Now is an excellent time to buy - CALL A REALTOR to help you with any of your real estate needs.