I believe 2009 will be a good year to buy a home or investment provided the following 5 rules are followed:
1. Buy for the long-term
I believe over the nexy year or so there will be many strong buying opportunities in many markets if one invests with the idea of a 5 to 10 year hold. The market may continue downward for another year or two but when the economy recovers - pent-up demand will be unleashed and prices will rise.
2. Know your local market
This is where an experienced knowledgeable realtor comes in. We see 20 to 30 houses a week minimum. We see what is selling and at what price. Colleagues in one's office share their experiences with us. Look for an agent that has been in business 15 to 20 years - someone who has been through all sorts of market. If you work with an agent who has only been in the business for 5 years, you are working with agent whose majority of experience is only in hot markets until now.
3. Bargain aggressively for property
Look for deals - make low offers - look at foreclosures - you will find a seller that NEEDS to sell and not one that just WANTS to sell. As a buyer you need to be reasonable and you are not going to be able to buy things for 40 cents on the dollar in most cases - but 70 to 75 cents on the dollar from the peak is a pretty good purchase. (This of course varies from market to market - in hard hit foreclosure areas, you might get 50 cents on the dollar - in stronger areas - maybe 80 cents on the dollar). Again, it all comes down to local knowledge.
4. Understand the risks in buying a foreclosure
As a buyer of a foreclosure, you will probably be buying a property that has been "beat-up" - folks losing their homes do not take care of their homes - in fact, some folks trash the home on the way out. I once sold a foreclosure property in Portola Valley, CA years ago (average price $2,000,000 or so) where the owner losing her house took all the appliances out and went so far as to remove all the electrical outlet and switch plates from the house. She took the carpet. Basically she took anything that was not bolted down. The other issue with foreclosure purchases is that the lenders typically have no knowledge of the property - the person hadnling the sale for the bank may be 2000 miles away so any disclosure you get will be extremely limited and prone to error.
5. Buy only what you can afford
In my 30 years of real estate practice, just about the only people who ever got hurt buying something bought something they could not afford. If someone buys a house and moves in with their family as long as they can comfortably make the payments they can just happily enjoy living there regardless of what the current value is. Howver, if one buys something they can not afford then one could be faced with having to sell in a down market.
My prediction - 2009 will be a good year to buy real-estate for a long-term investor who purchases property in a market they understand and at a financially comfortable level.
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