The current financial crisis began with a real estate crunch verging on depresion that continues and seems set to continue for some time to come. Whatever your interest in the real estate market the following might help you weather the storm.
Sellers
To say this isn’t the best time to sell is an understatement. Unless you really need to move it’s best to wait awhile until markets return to more normal conditions. The world has limited land but a growing population. Over time real estate has consistently proven to be one of best investments and will surely continue to be so.
If you have no choice in selling, eg due to a need to relocate, bear in mind prices are most likely to keep falling for a while, so the quicker you can sell the better. Set your price realistically, and make sure you show your home to its best.
If you have the financial stability now could be a good time to upgrade, as the price of your next property will also be off its high. Assuming you’re moving to a more expensive property and it has fallen by the same percentage as your home you’d be getting a good deal as in cash terms the new home will have fallen more than the old.
One option is to rent out your old home until its value rises again. This can swing two ways. First there’s the risk of holding two mortgages, which could be untenable unless you can find tenants. And there might be a glut of rental accommodation as others who want to sell decide to rent until prices recover, this would reduce market rents and raise the likelihood of vacancies. On the other hand some buyers might choose to rent while waiting for the market to bottom out. In this scenario the vacancy period will be delayed until prices are at their lowest.
Buyers
Buyers face a double difficulty – fewer properties on the market and the prospect of buying something that is likely to decrease in price in the short term. On the other hand every offer, however aggressive, will receive serious consideration. Don’t be afraid to test the motivation of the seller, you might just find a bargain.
Do your research before writing offers. Get hold of actual sold prices of similar properties in the area, either from your realtor or off the Web. Find out too how much prices in the area have fallen, and reduce the sold prices accordingly to give a starting figure.
Investors
Given the long-term merits of real estate, now is the time to go shopping. There may not be as much inventory as usual, but what’s there will be open to some pretty creative offers. If you don’t try, you don’t get.
In particular look out for foreclosures being re-sold, or those in danger of foreclosure who may be looking for a sale to keep their credit records in tact. Often they’ll be only too happy to stay on and pay rent.
Mortgages
The current financial crisis was caused by banks lending money to those without a hope of repaying. The banks got their fingers burned and the result is it’s now a lot harder for everyone to borrow money. The days of “zero down” are (temporarily?) over.
The range of mortgage choices available has been severely reduced, which means it’s all the more important to choose the right deal. If you’re looking for a mortgage research widely, check out Web comparison sites, and/or visit an INDEPENDENT mortgage broker with access to the whole range of deals. The same applies to those on fixed term deals nearing their end.
Negative Equity
Negative equity is the situation where the amount you owe on a piece of property exceeds the value of that property. In such circumstances the temptation may be to walk away and allow the lender to foreclose. However, this is not a good long-term solution since it will hit your credit record hard and make it harder and/or more expensive to borrow money in the future. Just keep in mind real estate is a long-term commitment and over the years the negative equity will be no more than a blip on the journey upwards.
Avoiding Foreclosure
If you’re having trouble maintaining mortgage payments, the most important thing is to admit you have a problem. Talk to your lender as soon as possible. Lenders HATE to foreclose, they’re not in the business of selling real estate, so they’ll be more than willing to try and work out a deal to keep you in your home.
Another alternative is to find a buyer who will let you stay on and rent back your home. This can work well, but be aware the buyer will be looking to pay below market value, and the rental costs may be excessive.
