How to Buy the Right Home in Today’s Real Estate Market

With inventory high and interest rates low, this may not sound like a very challenging topic. Buying a home should be relatively simple and straight forward, right? Well, yes, and no. Buying a home may seem relatively straight forward, but buying the right home is anything but simple these days.

In the “good old days” we had market components that were the opposite of what we see today, i.e. low housing inventory and mortgage-loan approvals available pretty much for the asking. As a result, the dynamics of the market were vastly different than what we have now. Home buyers routinely accepted what they felt were “minor” flaws in a property and bought it anyway. There were three primary reasons:

1. As a result of lower housing inventory, they felt a sense of urgency to take what was available before someone else did.
2. Buyers could buy more home than they thought, with little, if any loan documentation.
3. Buyers had “exotic” loan options like no doc, low doc, interest only, negative amortization, etc.

Flash forward to today, and we see much higher housing inventory and loan-approval criteria that bears no resemblance to what we had before. In their most basic form, what these market changes highlight is the importance of not just buying a home, but buying the right home. We have to keep in mind that all housing inventory is not created equal; as opposed to the prior market, today’s housing market inventory consists of numerous “distressed” properties. This pool of foreclosures and short sales is often characterized by “fringe” properties, or properties that were originally purchased simply because the buyer could, not because they should. A good example would be a nice 3-bedroom, 2-bath ranch-style home in a floodplain that also backs up to a very busy road. Maybe a nice home, but probably not the “right” home.

There are lots of good “How-To” lists out there about buying a home, like this one from CNNMoney.com ( click here ). Here are some additional tips on how to make sure you buy the right home in today’s real estate market:

• Stick to the fundamentals of real estate. Don’t buy a house just because it’s a foreclosure and because it seems cheap. It’s both of those things for a reason.
• Insist that the house fits you and your long-term needs. Be cautious about buying a home for a short-term profit.
• Be careful with “one-of-a-kind”, unique homes that appeal to a very limited market.
• Look for the opposite of “fringe” properties and make sure the home meets fundamental re-sale criteria like solid schools, services, etc.
• Create a list of important criteria that you need and want in a new home. There will always be compromises with any home, but don’t settle for less on major issues like location, schools, quality of construction, etc.
• And finally, know your financial limitations and stay within them. Don’t be tempted to buy a home you cannot afford by getting a loan that doesn’t fit your needs.

Work with proven professionals and stick to the real estate basics! If you’re interested in selling or buying a home in the Boulder, CO area, please feel free to contact us.