It's no secret that people like Warren Buffet and Donald Trump are actively involved in purchasing as much real estate as possible right now. Buyers need to understand that like Buffet and Trump, the smartest people in the real estate business are contrarians. They sell when prices increase and buy when prices are going down. This may be a little difficult for some buyers to grasp since it is exactly opposite to how most consumers behave. When prices increase, buyers stampede to buy property to capitalize on the increases. Of course, when markets fall, those who bought at or near the peak are generally the ones who are stuck with properties that are not worth what they paid. As one economist put it, "I know it's time to get out of the real estate market when my manicurist and the man who cuts my hair start advising me on how to make money by flipping real estate." If buyers are feeling reluctant, my advice is to be smart like Trump and Buffet--buy now when the interest rates are at historic lows and there are plenty of bargains as well. Think Location, Location, Location and Duration, Duration, Duration!  Add the high affordability factor right now and you have the perfect moment!

Seller strategies include having the seller pay part of the closing costs, pre-paying the buyers' homeowner association dues for one year, or providing home warranty policy. Since 35 percent of the properties in the U.S. are owned free and clear, having the seller carry part or all of the financing can be another viable option, depending upon the area and desirability of that area. Properties with financial incentives are excellent choices if you're hunting for a bargain. One caveat: avoid "wrapping" mortgages (i.e. expecting the existing lender to continue their loan after you sell to another buyer) unless you have negotiated a written approval from the senior lien holder(s) prior to closing.

Numerous lenders have buy down programs, including FHA. For example, on a $500,000 purchase price with a $450,000 loan at 6.5 percent, a permanent buy down would cost the seller $18,000. For $18,000, the buyer's loan is reduced $289 per month. To reduce payments by this amount would require a $45,800 reduction. (Please note that permanent buy-downs for 30 years are only available at a limited number of lenders. The typical buy-down is 2 or 3 years.) This approach may be too sophisticated for some buyers and sellers. The best way to explain it is for buyers to see what their payment would be with and without the buy down. Next, buyers need to know how much the monthly buy-down amount would amortize over a 30 year period. A permanent buy-down is a win for both the seller and the buyer.

Rent vs. Own Comparison:

House Price                           $400,000
Monthly Payment                   $2,995.00
Interest Rate                         6 %
Tax Rate:                             28 %
Down Payment of 5%:            $20000
Average Annual Interest         $22,528
Annual Tax Savings:              $6,307
Adjusted PMT                        $2,469   *You can apply to the IRS and take more $ home in your check!
Your Rent is                          $2,100

 *See your CPA on this approach and details appropriate to your circumstances!  Basically, you do not have to over-pay your taxes.  By increasing your dependents, you can many times take home $500 or more a month.  That would mean it would cost you less to own in this case.  Never under estimate the power of the write-off!