If you’re looking for a home, you might find a bargain 
 

An unprecedented number of people are finding they cannot afford to stay in their homes and are either listing the property for sale themselves or their banks are listing the property after foreclosure.  Either way there are an uncommonly large number of homes on the market and that is driving down prices – by a lot in some areas of the country.  For the bargain-conscious buyer, there has never been a better time to look for a home.   
 

No one can predict with certainty if we have hit the “bottom” of the collapsed housing market, but what is unquestionably true is that prices are well below the highs they hit in the midst of the “housing bubble” when access to easy money drove the cost of homes sky high.  Home prices are now the lowest they have been in many, many years.  And interest rates for a fixed rate loan are very low as well, creating a “perfect storm” of opportunity for a dedicated buyer who wants to find a good home at a good price and under good terms.   
 

If you held off jumping into the buying frenzy when home prices were shooting into the stratosphere, your patience may pay off in the form of a great house at a bargain price.  To find this dream house, start by looking around your own neighborhood or a neighborhood you want to live in.  Drive around and look for empty houses with “For Sale” signs.  These are likely houses where the owner is under some pressure to sell quickly, or the property is already owned by the bank.  In either case, you are in a good negotiating position to get the price down to where you need it.  In better economic times, banks were less likely to bargain; but in today’s market many banks own more real estate than they can handle, and will negotiate to get the property off their books.   
 

You may run into a seller who is already in default on their mortgage and facing foreclosure.  To avoid having a foreclosure on their credit record, they are trying to sell their home quickly.  The homeowner may even have an agreement with the bank to let a prospective buyer purchase the home at a price below what the owners owe, but that the bank will accept as settlement of their mortgage debt obligation.  This is called a short sale, and can be a win-win-win situation for the seller who gets out of their mortgage without a foreclosure, the buyer who gets a great deal, and the bank who closes their books without getting yet another property to manage and sell. 
 

If there is a sign on a property you are interested in, contact the real estate agent and inquire about the seller’s situation: Why are they selling?  Do they need to sell quickly?  Is this a “distressed” mortgage?  Is this a bank-owned property?  Find out if the borrowers or bank have been approached before and if they have turned down previous offers as too low.  Find out what the real estate agent thinks the owner would realistically consider. 
 

Another way to search for a bargain is to identify a real estate agency or agent  who works in an area where you’d like to live, and ask them to look for distressed real estate with the features you want.   
 

If you are seriously interested in finding a great bargain, don’t jump in before you have done your homework.  Spend some time evaluating the market you are interested in by looking at the recent sale price of homes like the one you want.  Evaluate the location or locations you are interested in for their desirability now and in the future – after all, you want your house to increase in value and be a good investment as well as a great home.  Once you start looking, resist the urge to buy the first decent house you see, even though you have done your homework and are a well-informed buyer.  Before you make the commitment to buy, it’s a good idea to look at several properties so you are absolutely certain before you sign on the dotted line.    
 

In this market, it’s more difficult to get credit than it was in the past, so make sure you have an adequate down payment (ideally 20% of the purchase price) to put toward the purchase of the home.  The more money you put down, the better the bank views you as a good lending risk and the harder they’ll work to get your business.  This is because the bank sees cash down as “skin in the game” – a strong indication of the borrower’s commitment to make their monthly mortgage payments so they can keep their home and keep their down payment.  Of course, if you have cash to plunk down for the full purchase price, your bargaining power is even greater.   
 

If you do intend to borrow money for your purchase, you should start to work with a lender early in your search to determine how much money the bank will lend you.  This amount will depend on the value of the home, your planned down payment, and your monthly income.  Take a look at our calculator to get an idea of how much house the bank may help you purchase.     
 

Every home search has both exhilarating and discouraging moments.  There has probably never been a better market for homes available at good prices and on good terms.  To get a real bargain, you may need to work a little harder – do your homework, look at a lot of properties, and stay patient and flexible.  But with planning, patience, and perseverance, you may find the house of your dreams.   Happy hunting!