AS A NEW HOMEOWNER, WHAT SHOULD I KNOW ABOUT BUYING IN A DOWN MARKET?
Naturally, sellers hate a down market, but buyers can make excellent purchases if they are wise and careful. First, a homebuyer should avoid a common misconception.
All homes for sale are under true market. There is a strong temptation to believe that all the homes you investigate are below market because they had a higher FMV (fair market value) in the recent past. In many cases, this is true. When the real estate market rebounds, some homes will return to their former value levels. However, if the market was "red hot" or "over heated" previously, many properties will increase in FMV, but not necessarily back to former levels.
Here are some positive suggestions to help you navigate a down market.
Research neighborhoods carefully. Don't assume that prices are down totally because of the market conditions. Neighborhoods change in cycles over time. Learn what projected trend lines predict for neighborhoods in which your prospective purchases inhabit. Need proof? Look at some neighborhoods in your area that are now less than favorable. Do a little research and you'll typically find that not too many years ago, this neighborhood had a very different character. The reverse scenario is also often true. Neighborhoods formerly deemed undesireable have had a rennaissance in recent years. Ensure that the neighborhoods you're considering are stable or on the way up.
If you have children, closely examine the schools they will attend if you get a bargain on a home in a certain area. Learn enough to feel comfortable that the condition and reputation of the local schools did not contribute to lower home values in a down market.
Check the property tax records and recent history of homes you consider. Many cities, towns, and counties re-evaluate real estate during boom periods. Therefore some homes may have a property tax value in excess of their current FMV in a down market. Do not depend on this condition as evidence that the home you may buy is really "under market value". Obviously, there is no incentive for these governments to re-assess and learn that these properties are worth less than their tax values.
You can find some excellent bargains in a down economy, but you still need to do your homework and become knowledgeable. A down market will drive all home prices lower. However, there still could be other intrinsic conditions that have limited the FMV of some properties, regardless of the state of the economy.
Check back here next time for Part II - How Can I Effectively Sell A Home In A Down Market?
***Article found on Homes & Land website. http://www.homesandland.com/real_estate_tips/Buying_and_Selling_in_a_Down_Market.html***
The Hisey-McDermott Team
Century 21 Miller Real Estate Ltd., Brokerage
467 Speers Road, Oakville, ON L6K 3S4
p: 905-845-9180 x 230