The real estate boom has come to an end, and now many homeowners and developers are forced to lower the price tag on properties to entice buyers. Although the decline of the market is bad news for sellers, it can be good news for people looking to buy their first home.
The Better Business Bureau advises anyone looking to take advantage of the current market to take their time and do their research before signing on the dotted line.
According to a recent report from the U.S. Department of Commerce, sales of new homes dropped 8.3 percent from July to August, and compared with a year earlier, pending new home sales are down 22 percent.
The report also showed pending re-sales dropped in all four U.S. regions -- falling 9.5 percent in the South, 8.3 percent in the Northeast, 2.9 percent in the Midwest and 2.7 percent in the West. And the average home sales price dropped by 8 percent in August from a year earlier to $292,000 -- the largest month-to-month decline in 17 years.
Analysts predict that housing prices are going to continue to drop, which will be tempting for people looking to become first-time homeowners.
The worst thing a house-hunter can do, however, is to rush into buying a home. They need to take their time, get their personal finances in order and do their research.
From its new book, Better Business Bureau Buying a Home: Insider's Guide to Success , the BBB offers the following seven tips for home-hunters to consider before they buy:
- New homes need inspections too: Like older homes, newly-built homes require an in-depth inspection to uncover shoddy workmanship, mistakes in construction, or other defects. You'll almost certainly have a warranty, but it's better to catch problems before you close, while you still have leverage with the builder.
- Stay in the middle of the road: Detached houses in the middle of the block are more sought after than corner lots. The noise and bustle of being near an intersection lowers the desirability and price of a corner house.
- Beware of ghost towns: Early buyers in new developments often get significant discounts or free upgrades. You're especially likely to save thousands if you commit before the ground has been broken. But if homes sell very slowly, you might find yourself one of the few lonely inhabitants of a community.
- Don't get caught in the rush hour: Even the most peaceful neighborhood can turn into a parking lot during commute hours. Visit the neighborhoods you're interested in during both morning and evening commute hours.
- You always pay the piper: Don't be fooled by "no-closing cost" loans. Although you don't pay out of pocket for normal closing costs, the lender typically includes such costs in the principal balance or charges a higher interest rate to cover the costs.
- Get rich quick? There are considerable risks in buying foreclosed property. People who have been foreclosed on often do not leave willingly. They might have taken fixtures or made it difficult, or even impossible, to live there without spending thousands in repair or renovation. Many financial institutions will not assume responsibility for any repair costs, preferring to sell properties "as is."
- Become a landlord: You might decide it's a better financial investment to buy a rental property than a home because rental properties have some tax advantages over owner-occupied properties. What you spend on upkeep and repairs is generally tax deductible and you get a break for depreciation.
The BBB Insider's Guides are sold at major book retailers including Barnes and Noble, Borders Books and Music, and Books-A-Million and online at www.bbb.org.
KELVIN COLLINS IS THE PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE BETTER BUSINESS BUREAU OF CENTRAL GEORGIA & THE CSRA INC., WHICH SERVES 41 COUNTIES FROM RICHMOND TO BIBB. CONTACT THE BUREAU AT (800) 763-4222 OR WWW.BBB.ORG.