By lynette.hjerpe@nafinc.com
September 7, 2014
August 14, 2014 As 2014 reaches its second half, the labor market has continued its steady improvement and many consumers have started to regain confidence in the strength and sustainability of the economy. Over the final two quarters, those factors could spawn more demand for homebuying. May and June saw a significant upswing in new home sales, offering promise that the first-quarter slowdown was mostly weather-induced and, more importantly, fully in the rearview. Still, in many areas of the country - particularly crowded metro regions along the coasts, such as Boston, New York or San Francisco - demand continues to exceed available inventory levels. As such, both first-time and move-up buyers need to be aware of some of the roadblocks that may present themselves. A recent CNBC piece detailed some of the common mistakes and misconceptions of modern-day house hunters - all of which prospective buyers should be aware of and try to avoid when entering into sometimes competitive environments. Under these circumstances, the margin for error is thin, so being educated, prepared and aware of your surroundings is essential. Here are a few of the more recurring themes: Overvaluing online information. Sometimes it seems there are new resources, following in the footsteps of the likes of Zillow and Trulia, being unveiled every week. And these tools and applications can offer a lot of insight for buyers. But too often people make the mistake of treating them as a sort of guiding gospel when they are really just price estimations dictated by constant changes to the marketplace. It's dangerous to assume that these estimations are automatically in line with what the seller will be asking for, especially as neighborhoods change, with property values appreciating thanks to comparable recent sales or fewer foreclosures in the area. The safest approach is often to employ the services of a trusted real estate professional who knows the area, and allow their expertise to guide you, especially during a bidding process. Failing to realize renting may be the better option. Owning a home is an undeniably attractive proposition, but only if you're prepared for all the costs and responsibilities that come with it. That means paying for homeowners insurance, title insurance, closing costs and perhaps even association fees - all of which can quickly add up to a total that's comparable to what your monthly mortgage payments equal. Make sure you conduct a thorough rent-versus-buy analysis based on the market in question, your income, expenditures and the duration of time you plan to stay in the given area. If you're unsure whether living in the neighborhood for at least five years appeals, then buying probably isn't the best decision. Underestimating the power and presence of all-cash buyers. Traditional buyers use home loans to pay for their purchases, but the post-recession market has been anything but traditional. Cash buyers dominated many parts of Arizona, California and Nevada, among other places, scooping up foreclosed or otherwise distressed homes en masse, often rehabilitating them and reselling for profit. The process, commonly known as flipping, has eased somewhat in terms of the regularity with which it's seen, but certain purchase markets are still influenced by these sort of buyers. In many instances, they represent the interests of large-scale investors, show up with cash in hand and make offers that are hard to compete with. From the sellers' perspective, a high cash offer is tough to beat, since it simplifies the process and represents a sure thing. For buyers using a mortgage, the best defense against these competitors is credit cleanup, along with best efforts to save as much for a down payment as possible and to ensure that all other finances are in order.