Best time of the year to be a home buyer

Holiday season is the greatest gift for home shopping
By: Robert J. Bruss: Inman News
During the slow home sales holiday season between Thanksgiving and New Year's Day, even extending through Super Bowl Sunday in many communities, few people think of buying a house or condominium. However, if you want to purchase a home and can drag yourself away from holiday festivities, this is the absolute best time of the entire year to be a home buyer.

Why is that, you ask? The answer has two parts: (a) only serious motivated sellers have their houses and condominiums listed for sale during this slowest season of the year for home sales, and (b) competition from other prospective home buyers is at its lowest now so your purchase offer will be extremely welcome and seriously considered by a motivated home seller.

There is an additional reason 2006 year-end is an especially good time to be a home buyer. That reason is it is a "buyer's market" in most cities, meaning there are more homes listed for sale today than there are qualified buyers in the market so sellers (and their listing agents) are extremely anxious.

It's a great time to be a home buyer. But not such a good time to be a home seller.

BEFORE SHOPPING FOR A HOME, SHOP FOR A MORTGAGE. However, before rushing out to buy a house or condo, smart home buyers first get approved in writing for a home mortgage. This is a slow time of year for mortgage lenders so they welcome your loan application.

Although mortgage brokers can arrange mortgage pre-approvals, the letter or certificate must come from an actual lender, such as a bank or mortgage banker. Most home mortgage pre-approvals are valid for 60 to 90 days.

Don't even consider a mortgage "pre-qualification," which means only, "We looked at your loan application and you appear to qualify but we haven't actually verified your credit and income." In other words, a mortgage pre-qualification is worthless.

However, home buyers should understand a lender's mortgage pre-approval is subject to (a) the lender's appraisal of the home you decide to buy, and (b) reverification of your credit and income (don't apply for additional credit or go out and buy a new car before you complete your home purchase).

WORK WITH AN EXPERIENCED BUYER'S AGENT. After obtaining a written mortgage pre-approval from a lender, the next step to buying a home during this best time of the year to purchase is to work with an experienced buyer's agent who understands the market in the vicinity where you want to buy.

Ask friends, relatives and business associates for recommendations of buyer's agents. Although any licensed agent can be your buyer's agent, many agents prefer to list homes for sale rather than working with home buyers who are often "time wasters."

A buyer's agent costs nothing extra. The reason is the listing agent of the house or condo you purchase will split the sales commission with your buyer's agent. Only in the rare event you buy a "for sale by owner" (FSBO) home and the seller refuses to compensate your buyer's agent would you owe any sales commission.

EXPECT YOUR BUYER'S AGENT TO PREPARE A "CMA" BEFORE MAKING YOUR PURCHASE OFFER. When you find "the house" or "the condo" you want to buy, before making a purchase offer ask your buyer's agent to prepare a written CMA (comparative market analysis). This CMA is the same form the listing agent prepared for the seller when the house or condo was listed for sale.

However, your CMA will be up to date, whereas the seller's CMA might be several months old. The CMA shows (a) recent sales prices of comparable nearby residences within the last few months (never older than six months); (b) current asking prices of similar neighborhood homes now on the market for sale; and (c) asking prices of recently expired comparable listings (usually overpriced).

As a savvy home buyer, you probably will have inspected many of the homes on your CMA. With the help of your buyer's agent, you can use the CMA information to arrive at a fair purchase-price offer.

Many buyer's agents recommend making a purchase offer based on a per-square-foot basis. For example, if nearby homes of comparable quality construction recently sold for $150 per square foot, you might want to make your purchase offer based on $150 per square foot.

Be sure to attach a reasonable good faith deposit check to your purchase offer. If you are making an especially low offer far under the seller's asking price, a substantial deposit accompanying your offer will often convince the seller you are a serious buyer.

You can be sure your buyer's agent will use the CMA prepared for your use to show to the home seller and the listing agent to justify your purchase offer as being reasonable.

However, if the seller doesn't accept your purchase offer, a luxury of buying during this slow season is there are few other home buyers in the market. The result is you usually need not be in a rush to respond to a counteroffer or make a new purchase offer.

Waiting a few days to respond, presuming you still want to buy the residence, will often make the seller think, "That was a pretty good offer. Maybe I should have accepted it."

KEEP YOUR PURCHASE OFFER SIMPLE. As experienced buyer's agents will tell you, it's best to keep your purchase offer as simple as possible. "A confused mind usually says no" is a very true motto. For this reason, it is best to include only a few contingency clauses in your purchase offer. Typical contingencies are:

1. LENDER'S APPRAISAL CONTINGENCY. Presuming you need a mortgage to finance your purchase, be sure to include a mortgage lender's appraisal contingency clause in the purchase offer. If the home doesn't appraise for at least the amount of your purchase offer that was accepted by the seller, then you don't have to complete the purchase and can get your good faith deposit fully refunded.

2. PROFESSIONAL HOME INSPECTION CONTINGENCY. Smart buyers make their home-purchase offers contingent on their approval of a professional home inspector's report to be obtained by the buyer after the seller accepts the purchase offer.

The cost is usually around $300. Buyers should always accompany their inspector for the two- to three-hour inspection because it is a good way to become familiar with the home and to discuss any unexpected material defects that are discovered.

A good source of experienced professional home inspectors is to hire a member of the American Society of Home Inspectors (ASHI). To find local ASHI inspectors, go to www.ashi.org or phone 1-800-743-2744.

If the professional inspection report reveals serious undisclosed home defects, as the buyer you can (a) cancel the purchase and obtain refund of your good faith deposit, (b) reopen negotiations with the seller to obtain a repair credit, or (c) if the seller refuses to renegotiate, go ahead with the purchase anyway (presuming you badly want the home).

3. SALE OF YOUR CURRENT HOME CONTINGENCY. During the last few years of a home "seller's market" in most cities, this contingency fell out of favor with home sellers and real estate agents. But during a buyer's market where any purchase offer is very welcome, many home sellers will accept a purchase offer that is contingent on the buyer's sale of their current home.

However, to be fair to the seller, most sellers will insist on keeping their homes listed on the market for sale while the buyer tries to sell his/her current home. In addition, most realty agents suggest a 48-hour or 72-hour contingency-release clause. That means if another buyer produces an offer acceptable to the seller, the first buyer then has 48 or 72 hours to remove his/her contingency clause for sale of their current residence.

SUMMARY: The season between Thanksgiving and New Year's Day, even extending to Super Bowl Sunday in many communities, is the slowest time of the year for home sales so it is an especially good time to be a home buyer.