Lake of the Ozarks Real Estate Blog

Buying a home is one of the biggest decisions an individual can make. So it’s understandable that one considering a home purchase may take their time to avoid rushing into such a large financial commitment. However, several factors might leave prospective home buyers who don’t purchase a property now wishing they had taken action sooner.

“Current market conditions have created a perfect storm of sorts that has made it an ideal time to purchase for first-time and trade-up buyers alike,” said James M. Weichert, president and founder of Weichert, Realtors. “Those who have the means and the desire to buy now but don’t, aren’t likely to see such a great opportunity again anytime soon.”
Specifically, Weichert offered three reasons why those who aren’t under contract to purchase a new home by April 30, 2010 might regret it.

1. They won’t receive a sizeable amount of money from Uncle Sam.
For the past two years, the federal government has offered a home buyer tax credit to help stimulate the economy. But that financial incentive is set to expire soon. First-time buyers who aren’t under contract to purchase a home by April 30, 2010 will leave the $8,000 that is available to them through the tax credit on the table. Meanwhile, repeat buyers will miss out on the opportunity to collect up to $6,500 from the government.

2. They might not lock-in on the historically-low interest rates.
Thanks to measures taken by the Federal Reserve including the purchasing of mortgage-backed securities, interest rates have remained historically-low for several years. With the economy beginning to show signs of recovery, it is widely believed that the government will soon put an end to these stimulus efforts.

If that happens, many economists believe we will begin to see a sharp increase in interest rates which could result in a much higher monthly payment for those who wait. For example, an interest rate increase of 1% on a 30-year fixed mortgage of $300,000 could cost a buyer $188 more a month or $67,000 more over the span of the entire loan.

3. They might miss out on record home price affordability.
Home price affordability is at its most optimal level in decades. As a result, those who wait to buy will likely pay more for the home they purchase than what that same home would cost right now. In fact, home prices have already begun to rise slightly in some markets. Instead of getting a better bargain, waiting to buy a home might net buyers a higher purchase price, less appreciation and less house for their buck.

“There is no time to waste for anyone who wants to take advantage of this great buying opportunity. Particularly for those who have a home to sell first,” added Weichert. “If you are prone to saying ‘what if’ and wondering what could have been, you will thank yourself down the road for buying now.”

Buyers should definitely get Pre-Approved for financing for 3 simple reasons.

1. To Save Time.  Even with today's market being a "Buyers Market" it is still to the individuals benefit to get pre-approved for financing.  Many times buyers believe that they are capable of purchasing a home in a certain price range but will not know for certain.  Could you imagine how heart breaking it would be to be touring homes that are priced between $150,000 and $200,000 only to find out after you have located that one house that you really love and want to purchase that you have a problem with your credit score.  Issues with credit scores can take months to resolve and just one or two marks on your credit could mean the difference between getting approved or not approved for financing.  Now you and your Realtor are out the time spent searching for and touring houses.  The seller may also be frustrated if they agreed to a contract only to lose it a few days later when you are not approved for financing.

2.  To Improve Negotiating Power.  As I mentioned above today is definitely a buyers market but in the last 45 days I have written two contracts only to discover that there was a competing offer coming in for the property.  If a property is well priced there is a good chance you are not the only potential buyer considering it.  If you submit an offer and can show that you are already pre-approved for financing and your competitor is not pre-approved your offer could hold more weight for the seller in consideration because there is less risk to them on the potential of losing the contract to non-approval of financing.

3.  Offers on Foreclosures require Pre-approval letter.  In today's market the foreclosures are very common and there are a lot of good deals being found in the purchase of a foreclosure.  Foreclosure properties require a letter of pre-approval be submitted along with your offer to purchase.  If you do not have a letter of pre-approval to submit with the offer the bank will kick back your offer and will not consider it. 

At John Farrell Real Estate our Agents work with local lenders on a daily basis and we are here to assist you.  If you are considering purchasing a home and would like to visit with us about getting pre-approved and perhaps receive some recommendations of good lenders please contact us at your convenience.  We can be reached at 573-348-2181. 

Prices are at Incredible Lows:  Real Estate Prices are at all time lows.  In the past 6 months I have done several deals that made me jealous of what the buyer was getting.  Seriously people are buying homes today that just a few years ago would have been 25 - 50% higher is price.  Even if you are a seller and you have to take less for your home to sell you will likely be able to take advantage of the reduced prices when you purchase your next home.

Interest Rates are Incredibly Low:  Just today I had a mortgage Broker come by my office and drop off a rate sheet showing 30 year loans for less than 5%; that is Amazing!  My Father, John Farrell, before he opened the Real Estate Office was Vice President for a local bank and he has said on numerous occasions that he remembers 18% interest rates.  Just think about that; a $100,000 loan today would have a payment of $542 per month with a 5% interest rate and financed over 30 years; In the early 80s that same loan at 18% would have cost you $1,511 per month, that is a difference of $969.

Tax Credit:  Buyers still have time to take advantage of the Home Buying Tax Credit.  First time buyers have until April 30th to locate a home and negotiate a contract to be eligible for the 10% or $8,000 tax credit.  Sellers who have owned their primary residence for a minimum of 5 years and manage to sell their house are eligible for a tax credit up to $6,500.  Remember these contracts must be negotiated and accepted no later than April 30th and closed no later than June 30th.

All Time High Supplies:  When you consider the foreclosure listings, auctions and other sellers there has never been more inventory for buyers to choose from.  This truly is a Buyers Market and if one seller is not willing to negotiate with you all you have to do is walk down the street and make an offer to the next seller.

Stop Waiting For The Bottom:  I tell everyone I know that if you wait to know for sure that the market has hit rock bottom and has no where to go but up then you will likely miss out on the best deals.  Look, no one can guarantee you when prices will hit rock bottom and start to go back up.  If that could be predicted, no one would buy until that happened and nothing would sell.  I truly believe that anyone waiting to hear that the market has bottomed out will likely miss out on the best deals.

Remember buyers and sellers are both taking risks.  Individuals who are selling today are taking a risk on the possibility that the market may begin to turn around in 6 months and prices could start to improve.  Buyers are taking the risk on the possibility that the market could get worse and the home they purchase today could continue to drop in value.  My suggestion to buyers is that if you want or need to buy stop worrying about getting the absolute best purchase you can and just look for the best house you can at the right price.  If you are planning to be there for a long period of time what does another $5,000 really mean.