Manufactured by a combination of Wall Street financial manipulation, overly creative banking practices, greed and plenty of fraud the real estate crash over the last three years has developed a whole new rule book for buying and selling property. Here are the 10 best new rules to keep in mind before you venture out into the marketplace.
#1- First and foremost do your own research. Many people got into trouble listening to mortgage brokers, real estate agents and loan officers. The problem wasn’t that all of these folks were self-serving, but most simply didn’t have the information to recognize what the end game would be when the bubble popped. The Wall Street derivative market manufactured what seemed like an endless supply of readily available cash for mortgages until the music stopped.
#2- Real estate prices don’t always go up. Historically housing values have appreciated since World War II at two to three percent a year on average close to the rate of inflation. Some years have been much higher of course, and many have been lower. For every person that makes money in real estate another loses.
# 3- Mortgages aren’t always easy to get. When bankers tighten underwriting criteria the mortgage market is constrained and finding financing can be down right treacherous. It’s best to get a long term fixed rate 30-year mortgage unless you plan on moving soon for certain. After all as millions of homeowners have learned being upside down on their mortgages you can’t always refinance.
# 4- Adjust expectations. The wisdom of buying all the home you can afford might sound nice, but the reality of purchasing the maximum mortgage can have a disastrous outcome. What happens if one of the qualifying buyers loses a job or becomes ill? You could find yourself where millions of Americans have over the last few years in foreclosure.
# 5- It’s a fools game to time the market. When real estate is booming and the economy is rolling like it seems like it’s never going to end beware. Conversely, when the market is falling it’s hard to see just how low things will go. All real estate cycles have a beginning, a peak and an end. The bottom of the market usually has a hard landing. Plan your strategy for the long run to protect you and your family from an uncomfortable ending.
# 6- Shop for homeowners insurance. Many people find out too late that homeowners insurance is far more expensive than they thought and in some cases unaffordable. Search home insurance quotes for your area on Housing Predictor for free without cost or obligation.
# 7- New home builders don’t always build. Although they’d like to, new home builders don’t always construct new modern homes. In fact, one of the major pitfalls of being a contractor is the cyclical nature of the business. When the housing market is hot they’re working hard to fill the demand with a supply of plenty of new homes, but when the economy chills hundreds of thousands of small and large home builders go bust.
# 8- Real estate is a good investment for the long haul. If you have a personality that is able to handle the ups and downs of economic cycles then it might be right up your alley. But if you have trouble handling perspective troubled tenants then property management might be right for you. A good property manager is well worth the commission, and just might keep you out of trouble with the bank. Only 15% of all real estate investors make money on their investments. That’s an old fact and it’s likely where the real estate market is headed again.
# 9- Get fully qualified for a mortgage. Buying a home or other investment property usually comes with a mortgage unless you’re in the enviable position of paying cash. These days it’s as easy as checking with a lender online. Housing Predictor offers mortgage information with a wide selection of lenders at no cost or obligation online.
#10- Buy yourself protection. Last but far from least don’t be cheap when it comes to protecting your financial investment. Whether you’re buying a home to live in or an investment property get two appraisals from two separate independent appraisers, and make your offer on any property to purchase subject to both appraisals being acceptable to you and the lender if there is one involved.