|7 buying tips for the down cycle
with builders. Don't be afraid to ask builders for concessions
such as steep price discounts, closing-cost waivers, luxury upgrades,
free landscaping, free trips and free club memberships. Many builder-incentive
packages are worth 10 grand and up! In some markets such as
Boston, new condos are selling for 20 percent less than they were
in mid-to-late 2005.
with home sellers. Unlike the go-go market of recent years,
offers of 5 percent to 10 percent or more under asking price will
not be inappropriate. (See "selling
tips" for some of the throw-ins that buyers are being offered.)
timing. Read up on local -- not national -- market trends,
religiously read for-sale ads, and get a sense of what's moving
and where, then be prepared to jump on bargains, especially as the
last of the speculators are being flushed out of the market and
for-sale inventories are at their zenith.
4. Avoid hot spots. Stay away from buying homes in neighborhoods that appreciated significantly above average home prices in recent years -- especially if you're moving for the short term. Once prices in these hot spots are corrected, these often see slower upward movement or remain flat after the overall market heads north again.
5. Modesty is the best policy. Consider more modest homes in well-maintained, established neighborhoods. By contrast, pricing and re-pricing on expensive homes, new homes and new condos make those products riskier during down cycles.
6. Flexibility. For maximum flexibility in pouncing on the right deal, get preapproved
for your home loan.
fundamentals. Just because a lender will advance you money
to live or build beyond your means doesn't mean you're standing
on sound fiscal footing. At year-end 2006, $330 billion of adjustable-rate
mortgages, or ARMs, were creeping upward. Avoid risky interest-only
loans and ARMs, opting for fixed-rate mortgages instead. And learn
from the recent past: Don't assume housing will appreciate enough
in the near term to cover your home's rising interest payments.
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