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Benefits of Buying Real Estate in a Down Market

By
Real Estate Agent
During an up market everyone is rushing into the real estate market and during a down market everyone is running scared. But if we remember markets go up and down. And generally in 10 years people that bought during a down market frequently are happier with the appreciation on their home than people that bought during an up market. Not only are prices lower but sellers are more willing to give cost concessions on the price and to fix items that need repair, compared to an up market when many sellers only look at full price offers and don't plan to fix a thing before closing. During a down market mortgage interest rates are often lower as the Fed will attempt to lower rates during a slow market. In addition to price there are some other benefits to looking at houses during a down market.

One of the first clients I had as an agent was a nice young married couple. We had been looking for about a month. We had planned on looking on a Saturday afternoon and there was one particular house that they had seen before that they were very interested in, and wanted to see again. Around 1 pm it started raining. They called and asked if we should still look. I told them I was still game if they didn't mind the rain. We went back to the house they were interested in from last week. The house was centrally located and had recently been remodeled which was what they had been looking for. Everything was fine until I went into the bedroom. The carpet was wet. Not just a little damp but soaked. The house had a leak. I went and found the couple and told them they might want to check out an "update" from our last visit. While they were a little disappointed they were happy we saw the house while it was raining so that we knew this now instead of finding it out the first rainy night after moving in. Since then I have never balked at looking at houses in the rain because while it might be harder to see the exterior of the house and the curb appeal the visit might still turn out to be more informative.

In a similar way looking at houses during a down market can be informative. While you are any more likely to find a leak there are other issues you can uncover. During an up market frequently everything is selling. New home communities' downtown lofts and older houses can all be getting multiple offers and selling for above list price. And when buying in such a market it can be difficult to determine which sections in the market are inherently weak. But when the market slows down this all becomes more clear. While all the subsections of the market are doing worse than before you can start to see which parts of the market are really tanking. Maybe in the central section of the city older houses are faring better than new condos because builders overbuilt condos over the last 10 years. Additionally maybe new communities on the west side of the city are faring better than on the east side of the city because of surrounding attractions and the better built roads leading to shorter commuting times.

Also during the boom when houses were frequently selling the first day people failed to notice a certain community had utility issues where their utility bills were 5 times higher than average because of problems with their utility district. During the downturn you might notice that while there are more houses in general on the market in certain neighborhoods almost every other house is on the market and none of them are selling. This might be a clue to something being wrong with the neighborhood.

Another thing we have found is during the boom home buyers will tend to ignore problems with houses. To close to the freeway, odd layout, small yards, poorly done additions, bad paint colors, kitchens that have not been updated since the Paleolithic era can all be ignored in the rush to buy something, anything before homes get out of your price range. But during the downturn you can find what matters to most people which will be valuable when its time to resale. So during the downturn you might find that kitchens that have not been updated are still selling because some buyers like older kitchens and some people like the idea of remodeling to their exact tastes. On the other hand poorly done additions are pretty much a showstopper.

Ki operates in Austin as a realtor. He wrote a free mortgage calculator along with a Mortgage interest rates widget that automatically keeps mortage rates up to date on your website.

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