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Special section 7 Bankrate experts with 7 top tips for '07

Take note of these home-buying and home-selling strategies in a down market, from Real Estate Adviser Steve McLinden.

 

Home buying or selling: 7 top tips for '07

7 buying tips for the down cycle

1. Negotiate 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.

2. Negotiate 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.)

3. Educated 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.

7. Follow 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.

To ask a question of the Real Estate Adviser, go to the "Ask the Experts" page and select "buying, selling a home" as the topic.

Create a news alert for "mortgage"
-- Posted: Dec. 18, 2006
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