Nolo’s Real Estate Tips for Home Buyers

If you've been waiting on the sidelines for the price of houses to hit rock bottom, you may have already missed the moment. The National Association of Realtors (NAR) just reported that existing-home sales last quarter went up from the first quarter of 2008 in 13
states.

True, most of the increase can be attributed to people who couldn't resist a super-bargain, like on foreclosed homes in Northern California and Florida. But as soon as you have willing buyers, you have competition, which tends to boost prices before too long. And in some areas of the country, prices actually rose in the last quarter -- like in the Yakima, Washington, Binghamton, New York, and Amarillo, Texas, areas.

It's really all just a reminder that timing the real estate market can be harder than it looks. For all the external economic indicators playing a role (unemployment, mortgage interest rates), the final piece of the puzzle is buyer psychology, and when enough homebuyers decide they want in on the market, it can change in an instant.

That takes us right back to the strategy we've always recommended: Look for the house you want to live in for a long time, in a neighborhood where home values tend to remain stable, and at a price that won't have you begging your bank for a break in a few years. Then enjoy it, even if prices go down in the short term, knowing you've got a solid long-term investment.

Ilona Bray

A good credit record and score has always been important, but with the tightening up of the mortgage industry, people with a low score may have a harder time than ever buying a house -- a shame, if you want to take advantage of recent dips in home prices.

But, warns Kenneth Harney, that's no reason to pay money to the various companies that promise to not only raise your credit score, but find you an affordable home in foreclosure and a low-cost mortgage to boot. For details of the consumer complaints and FTC lawsuits that these companies have engendered, see Harney's article in the San Francisco Chronicle.

As for raising your credit score, you'll have to do it the old fashioned way: by paying down your debt, paying bills on time, and more, as discussed in Nolo's article on Credit Scoring.

A recent poll of residents of the world's eight richest cities reveals that over 40% of Tokyo's residents don't want to sacrifice a convenient lifestyle to prevent global warming. While these results may seem startling, consider that the average house size in Tokyo is 64.5 square meters, or 694 square feet (not to mention that many residents probably take public transportation to work, and drive cars that put American gas guzzlers to shame). To really make a positive environmental impact, those of us who are quick to pat ourselves on the back for our eco-friendliness must think beyond bringing our own bags to the store and driving hybrid vehicles.

And there's no better time to think about these issues than when buying a home, which leaves a (literally) big footprint. While some features -- energy efficient appliances, CFL light bulbs -- can be added later, some "green" features are permanent. Consider these important factors:

• The size of the home. A few months back, I read an article about a woman in California's Central Valley who installed solar panels on the 3,000 square foot home she lived in, apparently alone. She was quite smug about her positive environmental impact. But she could have had done even better by choosing a smaller home that took fewer resources to build and could be heated and cooled more efficiently.

• The age of the home. Older homes sometimes don't have energy saving features, but can often be adapted to include them. Two years ago I had better insulation sprayed into my attic; it almost paid for itself with the rebate from my utility company, not to mention my lower heating and cooling bills. Again, fewer natural resources are spent when an old home is updated than when a new one is built.

• The size of the lot. A large grassy lot could mean a great place for dogs and kids to play, or it could mean heavy water use, toxic weed killers, and hours of upkeep time. If you don't buy more lot space than you need, you'll save yourself hassle, money, and environmental impact to boot.

With home values having recently gone down in many parts of the U.S., held steady in others, and even shown gains in a few areas, how are your supposed to know whether you're paying the right price for a home?

We gave a lot of advice for assessing the market in our book (Nolo's Essential Guide to Buying Your First Home) -- things like going to lots of open houses, checking comparable sales prices on sites like Zillow, and asking your real estate agent to prepare a report on sales prices of comparable properties (the "comps").

That advice still holds true -- but as was recently pointed out in an article by Realtor Magazine (a professional publication), it's especially important to pay attention to the prices of pending, rather than closed, sales, for the basic reason that they're the most recent. (And in a falling market, the appropriate price for the house you want to buy may be even less than the most recent pending comps.)

A good real estate agent will present the prices of pending properties to you no matter the market and explain any trends. But it helps if you know what you're looking for -- and, in some cases, what to ask for.

Ilona Bray

Homebuyers with dogs, get ready to say goodbye to muddy paws: Pet showers (which we only recently blogged as a must-have among British pet owners) are now on the list of what's newly trendy among U.S. home buyers. Yes, it's right up there along with a reduced carbon footprint, home elevators, outdoor living spaces, concealed appliances, and giant bathrooms.

Who makes these lists? This one comes from Mark Nash, one of the trusted advisers to our book (Nolo's Essential Guide to Buying Your First Home). He compiled results from an e-zine survery, and the results were reported in Realtor Magazine (scroll down to the article, "What's In, What's Out").

Ilona Bray

By now, many of us have heard of the latest trend in foreclosure sales: shepherding a group of interested buyers onto a bus, then driving them around to look at foreclosed homes (and maybe stopping for lunch along the way). Definitely efficient for the agent involved, probably interesting for the potential buyers.

In many states, there’s lots to choose from. But buyers who think every distressed property is a good deal should think again. There’s usually very little room to negotiate with the lender, and waiting for a reply can take awhile. I have a friend who put in an offer on a short sale three weeks ago, and is still waiting for lender approval.

Another potential problem is that you may have to take the property “as is.” That means you won’t have the benefit of a professional property inspector to look the place over (though apparently, some foreclosure tours bring one along). If you find problems later, they’re yours to fix, even if they were the prior owner's fault.

Finally, there’s the simple problem of moving into a house that may be in disrepair. Beyond worrying about whether everything works properly, you may have to do some serious work to make the place habitable. Some houses are even missing their fixtures or kitchen cabinetry (and there's a trend in stealing copper wiring -- sadly, sometimes worth more than the house itself).

Even if all these factors don’t deter you, do your own research first. In a market full of opportunity, you’ll probably be able to find a home without these problems at a fair price. And you shouldn't have a problem finding a real estate agent eager to take you on a personalized tour, either.

Alayna Schroeder

Dedicated dog showers are in (no more kitchen sink baths for Fido). The living room is out (replaced by the multi-use great room). We have this on no less authority than real estate author, broker, and columnist Mark Nash, whose annual list of What’s In, What’s Out with Home Buyers has just been published. Mark’s lists are so interesting (and usually on target), I thought my readers would be interested in seeing it in full, so click on over to the article at Realty Times. For more Mark Nash columns and articles, on everything from shopping for a home when you’re pregnant to purchasing flood insurance, see his website www.1001realestatetips.com. You’re bound to learn something new and interesting! (Snoring rooms, anyone?)

Marcia Stewart