Chitownproperty

Buying vs. renting, or cost vs. time — chicagotribune.com

Since the slumping home market has changed the equation determining the benefits of buying or renting, the Tribune is taking a fresh look at this age-old question. Prices are generally lower now, meaning it might be a good time to buy, but a tight credit market also means that buyers, particularly young people with little credit history, may have a harder time financing. Plus, overall energy cost increases mean that utilities and some repairs may cost more, adding to a homeowner’s responsibilities, whereas a landlord may pick up the tab for such things.

The best rule of thumb, as mentioned in the article, is to consider how long you will live in a particular place. In the past, three years was considered long enough to make it worth buying, but now that has gone up to five years.

What to know before choosing a developer — – chicagotribune.com

The Tribune posted a nice guide this week for how to perform due diligence on a developer if you are buying a new home, with tips for checking up on their track record and history with the city, pricing selections, and warranty items.

Even in this climate, there’s no rule like an old rule — — chicagotribune.com

This week’s Tribune has a useful article about how longstanding “rules” of real estate still apply, even in today’s changing market. Buyers and sellers can count on certain maxims to get the best deal, regardless of the financial environment, including:

• You should always shop around for mortgages
• The right initial price is the key to selling
• Negotiate every offer

Recognizing value key to buying home — chicagotribune.com

Calling today’s market a “buyer’s market” implies that now is the time to find a deal, but buyers show signs of wanting to wait a little longer, to see if prices will go any lower. That’s not a bad strategy, says the Tribune’s Carolyn Bigda, but the problem is timing that right. Instead of focusing on price alone, she counsels doing your research and finding good deals in neighborhoods you like; chances are, neighborhoods with good amenities, location, schools, etc have held their value, and will continue to do so. Choosing a particular lifestyle is just as important as finding a bargain.

Sale ain’t over till it’s closed — chicagotribune.com

You already knew that technically, your house wasn’t sold until you left the closing table and handed over the keys. But if you did sell your home in the past few years, you probably closed the deal mentally as soon as the buyer signed the contract.

Not so these days, as this article in the Tribune points out. The credit crisis means that buyers can have their formal mortgage application turned down at the last minute, even if they had already been pre-approved for that amount. Risks for the lender can shift based on the borrower’s income, credit, and the property’s location, and now that lenders are meticulously analyzing every mortgage, any one of those could unexpectedly derail a deal. Potential buyers would be wise to check with their mortgage broker or bank frequently throughout the purchasing process, and take action to shore up any weaknesses in their resume, like putting down a larger down payment.

It’s still buyer vs. seller — chicagotribune.com

The Trib’s feature real estate story this week points out something that’s painfully obvious to those of you trying to sell your homes right now: the buyers are in control, and not just by having a large selection. Buyers know that some sellers are desperate to move, and are demanding everything from simple inspection item repairs to furniture and new appliances with their offers.

Of course, this can get out of hand, and the example in the article of one buyer demanding that a flat screen TV and surround sound system be thrown in with the home is extreme. But as a seller, you can avoid some irritating requests by taking care of all those nagging repairs you’ve been living with at home–the bathroom door that doesn’t quite shut, the bathtub that needs more caulking, the furnace that runs a little hot, or the water heater that runs a little cold. These can be surprisingly simple to fix up front, but can become a major point of contention during a heated negotiation process.

Tips for bargain-minded homebuyers in the new year

Since there are still many sellers eager to move their homes and mortgage rates are down, getting ahead of the traditional spring market may be an even better opportunity for buyers this year. The Tribune notes that would-be buyers should be ready to make an offer to the more motivated sellers who are still saturating the market:

Two factors are now working in favor of prospective homebuyers. First, sellers still greatly outnumber willing buyers in many neighborhoods and highly motivated sellers abound. Second, mortgage rates remain relatively low.

Townhouses are an attractive option for home buyers looking for a step up from condos, but perhaps not ready for the additional maintenance and cost of a detached, single-family home. The decision to buy a townhouse is a matter of preference for living style and one of cost, but the Tribune summarizes a few of the important things to consider when shopping for one:

• Put location first – Because townhouses typically cost less than detached homes, you may be able to find one in a better neighborhood
• Shop for a bright, airy townhouse – Because townhouses are grouped so closely together, make sure you find one that doesn’t feel dark or cramped
• Focus on parking – Townhouse living means living in close quarters with neighbors. Is there enough parking for you and occasional guests?
• Look for a place where residents seem to get along – Again, living closely with neighbors means you don’t want to buy into a dysfunctional community

We know calling the current tough real estate market a “buyer’s market” sounds like rationalization, Realtors trying their best to put a shine on something that isn’t there, but there are solid reasons for why new buyers can find a good deal now more than ever:

“It’s no secret that home buyers can grab real-estate bargains during an economic down cycle. Even in many prime neighborhoods, homeowners who wouldn’t budge on price just a few months ago are now willing to negotiate in earnest, says Mark Nash, a real estate broker and author of ’1001 Tips for Buying and Selling a Home.’”

The recent downturn in the local condo market has opened up new opportunities for first-time buyers, the Tribune says. Some owners anxious to sell in today’s tough market are more willing to negotiate, and developers are throwing in more amenities as part of the base price to entice purchasers.

Check out this great video from CNN.com about saving for a downpayment on a new home, including how to weigh investment risk given a set amount of time before the purchase.

Those of you who can remember your economics class in high school will be happy to know that the basic laws of supply and demand still apply to the real world, especially to the real estate market right now. The general slowdown in the market means that inventory, i.e. supply, is up, meaning that now is a great time to buy. This piece in the Tribune points out that buyers have a distinct bargaining advantage with both individual sellers and builders, and shouldn’t be afraid to leverage it. Sellers will be more flexible on their asking prices and builders will entertain more requests for additional upgrades if it means they can finally make a sale.

You wouldn’t buy a used car without checking its maintenance and accident history would you? But many people purchase condos without carefully checking the building’s financial records, maintenance and assessment schedule, and board activity. Doing so can sometimes turn the most desirable home into a lemon, uncovering years of neglect or whopping assessments waiting in the wings.

As buyers, you aren’t expected to be able to pore over the building’s records to determine if there are any underlying issues, but your attorney should. Any good real estate attorney will vet the building and association documents for potential problems, but make sure you communicate with them about this very important step as you evaluate a home. It could save you some big headaches down the road.

With an uncertain market, that question isn’t as cut-and-dried as it used to be. Last week the New York Times published a fantastic online calculator to determine whether you should rent or buy, based on a number of variables like monthly rents, home prices, taxes, appreciation rates, and interest. Given these values, it computes the point at which the costs of buying a home make a better investment than renting. For the record, home price appreciation in Chicago expects to be around 4% for the near future.

A reader at CNN/Money asks the question whether they should buy now and take advantage of low interest rates, or wait and see if prices are going to fall even more. The answer, of course, isn’t as simple as they would probably like. You could take advantage of falling prices to bargain your way into more concessions from a seller. And you should always base the decision on how long you think you will stay in that home. Even if the market value continued to decline after the purchase, if you plan on staying there over five years, you’ll recover and likely see the modest 6 percent gains that have been the historical norm in this country. Also, don’t take on a risky, short-term adjustable mortgage right now, because when prices do rise, your monthly payments might increase to uncomfortable levels.