In last month’s column, I mentioned that in today’s market, it is far more important homebuyers focus on finding the right property than it is to spend time trying to obtain the “perfect deal.” In a perfect world, you would find the perfect home and it would be a “perfect deal” … but that’s not particularly realistic (and what’s a perfect deal, anyway?).
That doesn’t mean you can’t find the perfect property for your needs, and get a really good deal for it. Let me explain.
In the years leading up to the recession, money was loose. Banks were offering homeowners the opportunity to borrow up to 125 percent of their home’s value on a second mortgage. It seems ludicrous now that banks were loaning more money than homes were worth, but that’s the way it was. As such, homeowners were able to indulge in passion projects for their homes that under normal circumstances they probably wouldn’t have sprung for. It was not uncommon for homeowners to spend $50 to $60K on a kitchen remodel. The money was available. Thus, pools went in, backyard oases were created, covered patios were erected, and homes were significantly upgraded in many ways.
As we now know, that boom period is one for the history books. Unfortunately many of those homeowners found that when the dust settled, they could no longer afford their homes. This means that many of these customized, upgraded homes are now for sale through short sales or
foreclosures. As a buyer, you have a wide selection of homes to choose from right now, many of which may boast specific attributes that are very important to you, making it the perfect home for you. So find the property that has the amenities that are important to you now before
focusing on the “deal,” because a few things are likely to happen in the coming months, which you must understand.
First, home values are likely to remain soft. That means values may go down a bit over the next six to eight months. Indeed, it is possible you may buy a home today and it will be worth slightly less by the end of the year. However, the second important thing to consider is that
rates are likely to continue to increase slightly over the year, offsetting the decrease in value you might realize.
You must also consider loans with as little as 3.5 percent down payment required that are still available through FHA. But, by the end of the year, FHA loan limits (which are currently $729,750) are likely to be lowered to $625,000. This means you have a limited window of time
to purchase a home above $625K with this low down payment. Rest assured that even with values remaining soft, they will not dip so low that you’ll be able to buy a $700K home for $625K, so waiting or hoping for a swing of that magnitude is an exercise in futility.
Look for a home that you love. Is a pool a must-have for you? If it is, this is a terrific time to shop for a home with a backyard oasis. There are many, many unique homes on the market that were upgraded to include features that are important to you. If you have your heart set
on a home with a customized walk in closet, chances are you will find one. It might even be a bank-owned property (foreclosure) or a short sale, so there is the possibility you can get a really great deal. But it still may not be the perfect deal.
You will be living in your home, so you should love it. Trying to time the market will only serve to frustrate you, as the market is constantly in flux. It simply makes more sense for you to buy a property you truly love, and ride out the recovery of the housing market in a home that you enjoy each and every day. The recovery will come, but it will be slow, so you might as well take advantage of the wide selection of homes and the low interest rates offered today so that you can enjoy the right home for you and your family tomorrow.