IS NOW A GOOD TIME TO BUY A HOME?

by Fernando Arce, licensed Real Estate Broker

Many buyers are always asking me whether today is a good time to buy? The short answer to that question is YES! Historically, purchasing a property whether it’s for primary use or investment has been a good and safe investment. Real estate, as a fixed asset, should be a part of any successful portfolio.

Today, the real estate market offers many opportunities not found five years ago. For instance, the average sale price of a typical one of two family home in New York City has dropped approximately 20% in value offering today’s buyer a great deal. The bottom of the market may have come and gone since the latest reports shows prices slowly improving from last years figures. Inventory of homes are limited so if you see a house you want to buy and the price is right, make an offer. Chances are it won’t be available for too long.

With millions of foreclosure on the market, although the number of defaults have leveled off, there are homes that have come on the market as REO, Foreclosures and Short Sale. Buyers need to understand these new terms and how to go about in purchasing them:

• REO (Real Estate Owned) are properties that have gone thru the foreclosure process but were not purchased through the court system, are owned by the bank and are now being sold thru a local real estate broker. The majority of REO are sold to investors or speculators for all cash. These investors either keep it as are rental or remodel and sell them for a modest profit.
  
  
  
• Foreclosures are properties that are sold at the county court house to the highest bidder and generally sell for a discount of 10-15% below market value.
  
  
  
• Short sales have become very popular today with retail buyers who are not in a hurry to close on a deal since most short sale take over 6 months to close. In a short sale, the current owner is in default of the loan since it owes more then the home is worth. The seller negotiates with the bank to sell the home for less then what the owner owes the bank saving the seller the from foreclosure and damaging his or her credit even more. Buyers need to understand these new terms and how to go about in purchasing property that fall into these classifications.

Theses type of sales are not your traditional type of sale transaction so they need to be careful in the process or they can lose a lot of money.

Since the housing bubble collapse in 2008, banks have tightened the application process for buyers. The Dodd Frank Bill has issued a barrage of new regulations and consumer protection rules that will no doubt cost the buyer more in fees and application cost. FHA loans are still popular for a first time home buyer with average credit with as little as 3.5% down payment. Conventional loans (10% down or more) are also available. A mortgage loan officer would have to sit down with you and run your credit to get the best product for your personal situation.

Another important factor is the mortgage interest rate. Rates today are the lowest since President Eisenhower was President. 3.8% for a 30 year fixed rate with 0 points can be a great motivator to any buyer today. Keep in mind the interest paid on the loan can also be tax deductible; please speak with your accountant.

In next month's article I will be discussing the different type of properties available for sale in New York City along with the benefits and liability attached to them.

Mr. Fernando Arce is a licensed real estate broker for over 17 years.
He can be reached by email at: fernando.arce@aol.com or by phone at: 646-306-4326.

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