PROPERTY VIRGINS

By G.M. Filisko--Taken from REALTOR magazine
October 2009
Nervous. Arrogant. Cautious. Excited.

Although these words seem contradictory, they sum up today’s first-time buyers.

"First-time buyers are many things at once," explains Paul Gorney, a sales associate at Sudler Sotheby’s International Real Estate in Chicago. "They’re scared to pay too much, excited to get a ‘good deal,’ and confused because of the number of homes and the situations in which sellers are selling, such as short sales and foreclosures.

"First-timers need serious guidance," he says.

That guidance is especially critical for buyers who are trying to beat the Nov. 30 closing deadline to qualify for the federal first-time home buyer tax credit. (At press time, it was unclear whether the credit would be extended.) Here’s how to overcome three false assumptions that can derail first-timers.

1. "The housing market is weak."

First-timers have likely read every stitch of news about how homes aren’t selling. The trouble is that’s simply not true in many entry-level markets.

"First-time buyers need to understand the environment they’re competing in," says Dana Graham, CRS®, a sales associate at Prudential California Realty in Palos Verdes, Calif. "In my market, homes for first-time buyers priced under $800,000 are hotter than a $2 pistol. A few months ago, one had 21 offers."

Graham turns that fact into a positive. "If there are so many other buyers," he tells first-timers, "you’re not dumb to be buying now."

2. "I need to see all the options."

Many buyers proceed with excessive caution because of the endless inventory and their desire to find the perfect home. That can lead to paralysis by analysis, says Kathleen Alexander, ABR®, CRS®, a sales associate with Keller Williams Realty Boston Metro. Like Graham, Alexander uses facts to get buyers off the fence. "I make sure they’re armed with all the data they could possibly desire—which homes have sold in which areas and for how much—and I explain how to interpret the data," she says. "I want them to have a firm grasp on the market. That takes away a lot of the hesitancy."

Graham stresses today’s low interest rates. "I tell them that rates now are late-1950s type rates," he says. "They have nowhere to go but up. If they go to an entirely plausible 7.5 percent—which is still low—prices would have to go down by about another 20 percent to make up for the difference in their monthly payments."

Don’t forget to remind them about the first-time home buyer tax credit deadline. "I tell buyers the tax credit is truly $8,000 they’ll get back when they file their taxes," says Sam DeBord, associate broker at RE/MAX Connected in Seattle. "If they normally get a tax refund, they’ll get an additional $8,000. It’s a gift from the government to get them started as home owners." (Note: There are income limits; buyers should consult a tax professional.)

3. "I’ve found a bargain!"

It’s true that affordability is at record levels today, but many buyers need help putting price into perspective.

"They think they can get a really, really nice house for $50,000, but the average home in our market is $150,000," says Craig Frooninckx, e-PRO®, GRI, a sales associate with DPR Realty LLC in Phoenix. "They perceive that there are really great deals, which is true. But a lot of homes in our area are stripped of all their fixtures. While a home may be listed for $60,000, buyers are going to need $40,000 in cash to replace the plumbing and restore the kitchen and bathrooms."

That can be hard for buyers to accept; Frooninckx often has to ferry them around so that they can witness the homes’ condition themselves. "We have to look at the really low-priced homes for them to realize they don’t want to do all that work," he says. "Then I say, ‘Give me a shot at showing you a couple of houses I think you’ll like.’"

Before you take on any first-time buyers as clients, do some due diligence. "I make them come in for a chat to make sure they’re serious and can qualify financially," Graham says. "It’s a litmus test. If they’re not willing to spend an hour or two to talk about their needs and financial situation, they’re not serious."

Time is ticking for First Time Home Buyers Tax Credit

Time is running out for the first time homebuyer tax credit. Interested first time homebuyers should be in contract by October 10th to ensure a timely close before the end of the year to qualify for this credit.

The following article taken from Bloomberg.com gives an overview of what may be to come in the next few months with the housing market;

Sept. 21 (Bloomberg) -- The recovering housing market may be heading for a relapse as President Barack Obama and Federal Reserve Chairman Ben S. Bernanke consider ending support for the source of the global financial crisis.
The Obama administration is studying whether to let a first-time home buyers’ tax credit expire as scheduled at the end of November. Bernanke and his Fed colleagues may continue talking this week about how to wind down purchases of mortgage- backed securities, according to Peter Hooper, chief economist at Deutsche Bank Securities Inc. in New York. The two programs have helped stabilize real-estate demand, with new-house sales rising 9.6 percent in July from the prior month, the most since 2005.

Ending these efforts may stifle the housing rebound by depressing sales and pushing up both mortgage-backed bond yields and interest rates on home loans, even in the face of the record-low zero to 0.25 percent short-term rates the Fed has engineered, said economist Thomas Lawler. A weaker housing market would likely dampen the economic recovery and undercut shares of builders including Fort Worth, Texas-based D.R. Horton Inc. and Miami-based Lennar Corp., that have risen 40 percent this year, based on the Standard and Poor’s Supercomposite Homebuilding Index of 12 companies

Abrupt Stop
An abrupt stop might push up mortgage rates by a half to one percentage point, said Hooper, a former Fed official. Tapering off -- by reducing weekly purchases and stretching them beyond the end of the year -- would have a more muted effect, pushing rates up by at least a quarter percentage point, he said, adding that the Fed may announce just such a strategy after its meeting this week.
Mortgage rates for 30-year fixed home loans averaged 5.04 percent in the week ended Sept. 17, down from 5.07 percent the previous week, according to McLean, Virginia-based Freddie Mac, a government-controlled mortgage-finance company.

NOW IS THE TIME TO BUY!!!