Bay Area: 7 Things Homebuyers Should Know (?)

We homebuyers hear an awful lot about the top 5, top 10, top 20 things we should know. Frankly it all gets a bit much. Still, the lists are ever fascinating, as they seem to contain– in neat chunks– the secret to one of the most mysterious processes first time buyers have ever faced.

This July, ’08  list, 7 Things Buyers Should Know, comes from Paul Kedrosky, blogger and author of Infectious Greed who is also a mortgage lender at a bank.  The list is interesting in that in some areas, it diverges from what other lists have told us. Read on:

1. 6 months ago is ancient history. What your neighbor sold his house for 6 months ago doesn’t matter.   What the seller was asking for the house 6 months ago doesn’t matter.   What matters is what the market will support today.

Does this though imply you should not consider price reductions if a home on the market for over 6 months? Certainly knowing the history of a home’s price gives you some advantage.

2. Don’t worry so much about what you paid for your house. Instead, look at the difference between what you can expect to sell your house for and what it’s going to cost you to buy the new one that you want.  

3. Now is not the time for do-it-yourselfers. When the inventory levels are, depending on property type and area, any where from twice as much as is healthy…..to 750% as much inventory as there should be….. you need to find a professional to help you navigate the markets and get your house noticed.   I’m not, frankly, just talking about calling the Realtor who sold the house up the street.  I’m talking about calling a high caliber professional who knows what it takes and can really give your house the attention that it needs.  

This would seem to be a tip for homesellers, not buyers. It also  goes on to link to specific Realtors by name (deemed qualified), so it may not be entirely objective in what I can’t help but feel is a slam on less traditional DIY type real estate services.

4. Any interest rate that starts with a 6 is a good number. …..From 1971 to 1998, we did not see any mortgage rates that started with a 6.   Frankly, we’ve gotten spoiled in an era of cheap credit and we need to keep things in perspective.

This is interesting, and a good point for buyers to really consider.

5. There is a Tangible Difference in working with a true mortgage professional.  I’m not talking about the difference between a mortgage broker…..or a mortgage lender at a bank…..   I’m talking about the difference between someone who can help you navigate the changing environment that we’re in.  

6. Don’t buy a house today if you aren’t going to stay there at least 7 years. That’s right, a mortgage lender is telling you that if you don’t have at least a 7 year time frame in mind, you shouldn’t buy a house right now…… If the market drops another 5% over the next year and then stays the same for two years, it’s going to take 7 years for you to recoup the 5% loss and then build up enough to pay the 6% Realtor’s fees when you sell and make a little profit too.   Long term, the value of real estate investments is very solid, but this market has spread things out a bit longer.

7. It really is a good time to buy a house. No, I’m not turning into a National Association of Realtors choir boy.   If you go into the transaction with the right mindset (long term investment), with a talented group of professionals (Realtor, lender, inspector and accountant) backing you up, and you remain analytical about the financials and keep the emotions from forcing decisions, I firmly believe that you’ll find yourself very glad that you made the move you made.  

This last bit might be the most controversial, at least here in SF, where some people believe prices have yet to bottom out. Of course, others expect no such downturn. Still, the idea to stay awhile instead of try to flip is solid.

I’m interested in reader reactions, or “homebuyer tips” that might have been neglected here. Got any?

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Photo credit: First Time Buyer Programs