HomeMaxima.com Real Estate Perspective: What To Do in Buyer's Market
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Real Estate Perspective: What To Do in Buyer's Market

Real Estate Perspective: What To Do in Buyer's Market

Update: July 16, 2008
Published: October 23, 2007

Needed Tools For Home Seller (For Sale By Owner)

1. Use our Free Listing and Online Auction: FSBO Auction

2. Find and use a low-cost MLS Listing - Gain exposure to agents' networks
Note: Mention auction date in the MLS and provide a link (URL) to your property at HomeMaxima.com
Ex: http://www.HomeMaxima.com/Home/lotFSBOAuction.cfm?lotID=xxx (where xxx= your Listing ID)

3. Use Free Advertisement - Get online prospective buyers: Craigslist and others
Note: Put a link (URL) to your property at HomeMaxima.com
Ex: http://www.HomeMaxima.com/Home/lotFSBOAuction.cfm?lotID=xxx (where xxx= your Listing ID)

If you are selling your home via a real estate agent, you can ask your agent to register and post your property for auction (Free). For further info, please go to: Home Auction

It is now July of 2008 and it has been a Buyer's Market for more than 2 and half years. 2008 home prices have plunged some 20-30% many areas of Arizona, California, Florida and Nevada. 2007 new home sales has plunged 34% coupled with a drop of 13% of existing home sales. It's not unusual to see many "For Sale" signs close to each other in one street. And in some areas properties have been unsold for more than 12 months.

Properties in California have gone up more than three-folds since 1996. A similar increase also happened in Arizona, Nevada, Florida, and some part of the Northeast. What's comes up must come down. That is exactly what we are seeing right now.

Compounding the problem was the rate of foreclosures due to easy credits. Earlier this year, six of the largest sub-prime lenders have filed for bankruptcy protections, including the NYSE-listed New Century Financial Corp., the largest sub-prime lender. The sub-prime mortgage is a market about $600 billion. The number of foreclosured homes held by Countrywide Financial Corp. (CFC), the nation's biggest residential lender, has increased some 60% as compare to last year. On August 16, 2007, CFC has used its line of credit and borrowed $11.5 billion from 40 banks to meet its funding needs. CFC has made some $250 billion worth of loans in the first six months if this year.

The recent turmoil in mortgage industry has plunged the Dow more than 1,000 points within a few weeks. Consequently, the Fed has unexpectedly cut discount rate a half percentage point on August 17, 2007.

The mortgage problems happened in part because of loosening of credit requirements and mortgage qualifying criteria during the years of 2000-2005. People with poor or unproven credit rating could buy properties with little hindrance.

The sub-prime problems will not go away and may be spreading wider. The latest data from RealtyTrac show 179,599 foreclosure filings in July 2007. That is the highest monthly figure ever reported and is 93% higher than that of last year. RealtyTrac data indicated that more than 176,000 homeowners got foreclosures notices in May.

Moreover, many lenders have in their possessions a substantial number of unsold homes that they can not afford to hold out for better pricing period when they do not see the light at the end of the tunnel. And so it seems. If banks and lenders unload these inventories there will be significant price drop, even further down than in previous period of 1990-1996.

For fear that the Fed could intervene or impose stricter guidelines, lenders have already tightened mortgage standards. These factors help push the unsold inventory to more than 4 million nationwide. This will in turn create more pressure to lower home prices.

Experts predict that this situation could last through 2008. And there is no breathing for new homebuilders either. Sales have been sluggish at best. And when data, on the surface, showed some increase in activities in new home sales, often underneath laid significant cut in pricing or lots of incentive.

So what do you do in this market as buyers?

If you are relocate and need a home for you family, then it's is a good time to shop and buy, specially interest rates are still low by historical standard. There wasn't any bidding war and buyers now have time and choices to shop for their desirable homes. If you have missed the recent booming years and rental is not a life-style problem for you, then you property can probably wait a little more, perhaps another 6 months. Recent economic indicators show that mortgage rates may not go much higher and housing prices will likely come down further.

There is no proven theory in timing the real estate market. If you follow the market closely and doing research carefully, depending on your need and locality, you should know, not exactly, but roughly when would be the best time to buy.

What are the choices for buyers?

You can certainly negotiate lowering sale price. You can ask for incentives, upgrades. And most importantly, you should ask for rebate deducted from buyer's agent commission (fee). Rebate to buyer is no longer a luxury that you could not afford. It is the trend of the future.

When the last real estate boom happened, because of bidding war on properties, buyers were afraid to mention rebates. But rebates are here to stay. Buyers now have many choices. You could go with traditional agents or discount agents.

What are the choices for sellers?

If you are an experience or knowledgeable seller, you can certainly do For-Sale-By-Owner (FSBO) using the Internet. There are many sites that offer FSBO listings, for a fee or free of charge.

Sellers could also do a hybrid process, using MLS (Multiple Listing Service), i.e. cutting out the listing commission on seller side and maintaining a reward for buyer's agent. The MLS used to be the exclusive tool for agents. But that is no longer the case. For a small fee you could list your home on the MLS to get larger exposure. Some web sites may even offer free MLS listing.

Whether you use an agent or doing FSBO, you still need to open an escrow account. Most of the work will be mediated through this escrow account. A basic real estate transaction has 4 parts:
1. Purchase terms: offer and counter-offer.
2. Escrow functions.
3. Both sides do all required instructions to close escrow.
4. Financial proceeds to all parties.

Selecting and filling out real estate forms can be intimidating. But thanks to the Internet, just a few clicks away and you can have access to these forms. It would be better to use forms designed specifically for each state since forms are designed to comply with state laws.

Sellers also have many choices with discount agents, besides traditional agents. You should ask for reduced listing commission. Keep in mind that, whether you are on the buying or selling side, some discount agents may or may not match services performed by traditional agents. Before interviewing agents you should use this checklist.

As sellers, including individual sellers, banks or lenders (REO Foreclosure), and new home builders, you can use HomeMaxima.com's Home Auction or FSBO Auction (For Sale By Owner) features FREE of charge. And don't forget that as seller or buyer you can have agents bid to win your business at HomeMaxima.com.

Good luck.

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