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Housing: Buying

posted 01 March 2008

Market Slump Presents buying Opportunities

By Charles J. Kovaleski

A classic way to save money is purchasing during a down market. Coats are cheaper at the end of winter. Bakery bread made Monday is heavily discounted by Tuesday. Knick-knacks left over at the end of a garage sale often are given away.

So with some home prices rolled back to 2003 levels, now may be the time to buy. Consumers, however, need to remain prudent researchers as they seek value in the downturn. General trends – prices nationally and in Florida are falling – may take on a particular nuance in a specific market.

For instance, recent national analysis from Zillow.com, a Web site that estimates home values, prompted this conclusion.

"With consecutive declines over the past five quarters, we haven't seen the housing market hit bottom yet, and it may very well get worse before things get better,” Zillow vice president of data and analytics Stan Humphries said in a news release.

But throughout Florida, some areas have touched bottom while others remain prone to further price erosion. Zillow’s data shows the following raw numbers:

• In Orange County/Orlando, the median price (the point where exactly half the houses cost more and exactly half cost less) for an “average” house in December was $211,922 – a one-year decline of 12 percent.

• In Miami/Fort Lauderdale (different from Miami-Dade County), the median price in December was $259,659 – a 14 percent drop from a year ago.

• In Leon County (including Tallahassee), the median home price was $187,024 – a 1.4 percent drop from a year ago.

While there’s no way to absolutely know when home prices have hit bottom, consumers can learn more by consulting with local Realtors and real estate attorneys. Some analysts say that prices in South Florida still may be dropping, while parts of the Panhandle and the Orlando area are already at the bottom of the price trough.

Educated buyers will ask about trends - and specifically request a comprehensive/competitive market analysis (CMA) as an initial step. This gives an idea of recent sales as well as original listing prices.
When inquiring about a specific market, getting a feel for inventory is another important piece of information: The more houses on the market, the more pressure for prices to fall. Jobs and wages also are key elements, and chambers of commerce can be good starting points there.

Once research indicates that a particular home or neighborhood may be a good deal, the basics of home buying take hold. These can include:

• Keeping resale in mind: The home design might be unique, but will a future buyer think the same? Understand what nearby development – commercial and residential – is planned and how it may impact the way the house and neighborhood are perceived in the future. Be wary if your intent is the quick-flip. Just because a property has increased by double-digit percentage points in the past is no guarantee of future performance. Also, tightening loan requirements may have cut down on the potential pool of buyers.

• Getting your financial house in order: More stringent loan rules might impact you. Many lenders now require at least a 10 percent down payment –$20,000, for example, on a $200,000 purchase price. Before you bid on a house, shop for a mortgage and know what you qualify for. Buyers with secured financing present a stronger position.

• Negotiating everything: Nearly everything in the transaction is on the table, from closing date to closing costs. Don’t be shy about requesting that sellers pay all fees and commissions. Sellers are more motivated than usual, polishing their homes to a high sheen. Especially with builders sitting on large inventories, be sure to ask for concessions, including price cuts, free landscape additions, free clubhouse fees and closing-cost waivers.

• Asking questions: Know a seller’s motivation by asking. Find out what the seller paid and how long ago (these answers typically are on file with the county property appraiser’s office and, depending on the county, may be available online). If a seller is changing jobs, an astute buyer can be part of the solution by offering a quick sale.

Consumers can find some of the best home prices in five years. As with stocks, it’s impossible to time the housing market. Good research always is a crucial element. The market may be down, but there’s no reason your guard should be.

CHARLES J. KOVALESKI

is president of Attorneys’ Title Insurance Fund, Inc., (The Fund) the leading title insurer in Florida and the sixth largest title insurance company in the country. Acknowledged as the Florida residential real estate expert, The Fund has been in business for more than 50 years and supports a network of more than 6,000 attorney agents statewide who practice real estate law. The Fund, based in Orlando, Fla., underwrites more than 300,000 title insurance policies for owners and lenders in Florida every year. For more information, visit www.MyRealEstateStory.com.