It's a sign that the housing market is turning around. More people are signing on the dotted line and closing on their deals. The National Association of Realtors says pending home sales are up nearly 15-percent -- that's a two year high.
Broker and agent Peggy Finnigan with Salem Diversified Services in Northville joined us in the mix to talk about whether metro Detroit is following the national trend and if buyers should even look at homes that are in bad shape or stripped.
She also has the following tips for buyers and sellers:
Do Your Homework
Buyers generally have the advantage in a down market, but this doesn't mean you should walk into a transaction blindly. Prospective buyers should search the internet for listings, inquire with a real estate agent and check the local newspapers to gain insight on a particular area. Many national and local real estate agents make their listings available on the internet. The objective of this research is to get to know the price range for the area. You want to get a sense of what a low price would be for your desired area.
Get Your Ducks in a Row
To make sure that you're able to pounce on a deal at a moment's notice, it makes sense to get pre-approved for a mortgage.
Preapproval means a lender has agreed to lend you a certain amount. Don't get this confused with prequalification -- that's just a lender's speculation about what it thinks you'll be able to borrow. But also don't assume that preapproval is an iron-clad guarantee. Even a preapproval comes with conditions, and you'll need to satisfy the lender -- who's scrutinizing borrowers harder than ever -- that you're financially stable and still employed right up to the day the house closes.
If you can't put down the usual 20 percent, you may still qualify for a loan. There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.
It also makes sense to line up a home inspector and an insurance agent. These professionals can provide valuable information to the buyer about what parts of the home might need repairs and what it will cost to insure.
Aim for a home you can really afford
If you do find a home, remember how we got into this slow market in the first place and do not put yourself into the same situation that so many are now finding themselves in. Do not buy more house than you can afford. Just because a bank may be willing to lend you a large amount does not mean you can actually afford it. The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.
Avoid a Bidding War
When you are shopping in a down market the last thing you want to do is let your emotions get the best of you. A bidding war is almost always an unnecessary waste of time and, in the end, a waste of money. Down markets are all about getting a really good deal, so to fritter away that possibility on an ego-driven desire to win is foolish.
The best advice for avoiding a bidding war is to set a price limit and stick to it. Remember, there are plenty of homes out there and other deals to be had.
Don't Be Afraid To Walk Away
Real estate prices usually drop as inventory increases. In a down market, there are always many choices available. If you are not getting the deal you and your Realtor feel you deserve, do not be afraid to walk away, and look at the next home on your list. Remember that in a down market, it is you - the buyer - that has the power. Some sellers refuse to understand that the market is down, and will not accept any offers less that what they feel their home is worth. Stick to the price you had initially decided the home was worth; if you cannot make the deal, try again next time.
1. Make those repairs. While in years past it may have been enough just to cut the grass and retouch the paint, anyone looking to sell in today's market will have to take care of those more onerous repair projects as well. The buyer that might have bought a fixer-upper five years ago now has more choices.
2. Price to the market. In many cases, sellers will have to bring down their asking price below what the house might have fetched just a couple of years back. If you aren't prepared to sell at fair market value, then you probably should wait. The properties that are selling are selling at or slightly less than fair market-it is very, very rare to have a premium house.
3. Know your agent's stats: Finding an agent with experience selling homes in your market will help ensure correct pricing. When deciding on a real estate agent, find out how long it usually takes him or her to sell a house. It's best to choose an agent whose properties sell in an average of three or four months, a time frame that indicates the agent understands how to price the market.
4. Be flexible. Ensuring that your house is ready to show at all times will make it easier for prospective buyers to see it. Be flexible and willing to let you showings happening happening any day and time.
5. Respond to Offers: If a potential buyer comes in with an offer you consider too low, resist the urge to turn up your nose. After all, it takes a considerable amount of paperwork to make a formal offer, so even a low bid signals interest. You need to respond. Do a serious counteroffer. You have nothing to lose by countering, everything to lose by rejecting it out of hand.
Peggy Finnegan can be contacted by calling 248-410-8484.