Rebounding housing prices are making the market tricky territory for buyers to navigate. While it stood stagnant for several years after the housing bubble popped, today's market is robust, particularly in suburbs of major metropolitan areas. Competition will be fierce among those looking to purchase new digs during this year's spring home-buying season, but there a number of ways sellers can be persuaded to accept an offer below their asking price.
According to a March survey by Fannie Mae, 41 percent of buyers expect home values to increase over the next 12 months. The sound of a promising investment has a lot of consumers looking to broker a deal in the near future. But inventory in the housing market is limited. Coupled with aggressive competition, that presents a host of challenges for prospective buyers.
Arguably the biggest handicap is it's no secret it's a seller's market. Home prices throughout the country saw an 8.1 percent jump in January compared to last year, marking the largest hike since 2006.
Consider these expert-recommended tips on how to purchase the home you want at a reasonable price:
Know your creditworthiness. Before diving into your search, check your credit report for errors. Consumers are entitled to one free report per year at www.annualcreditreport.com. The process for fixing mistakes can be time-consuming, so it's important for buyers to look at their credit history several months before starting their housing hunt.
If your credit isn't up to par, devote time to paying off bills and revolving credit card debt. Those with a credit score of 700 or above typically get a better interest rate on their mortgage, so it may be worth waiting until you inch over that hump before applying for a loan, says Brendon DeSimone, real estate expert at Zillow, an online real estate database.
Get preapproved for a mortgage. Many buyers make the mistake of browsing houses before applying for a mortgage. "There's no point in driving around the neighborhood to look at houses without seeing a lender first," says Frank Donnelly, a certified financial planner and chairman of the Mortgage Bankers Association of metropolitan Washington, D.C. By doing so, buyers can determine their price range and avoid wasting time looking at properties they can't afford. It's a good idea to obtain offers from at least three lenders prior to choosing one.
In today's market, being preapproved for a loan is a must; being prequalified, by which applicants receive a good-faith estimate of the fees and costs associated with their loan offer, won't do much good.
Find a Realtor you trust. Consumers who house shop without a real estate agent or Realtor put themselves at risk, largely because a typical homebuyer doesn't have contacts in the local industry to know what homes are for sale that aren't publicly listed. Friendships between Realtors also work in the buyer's favor. Michael Corbett, Trulia's real estate expert and author of "Before You Buy!", "Find It, Fix It, Flip It!" and "Ready, Set, Sold," says most buyers don't know the tricks to brokering a deal, which can ultimately cost them a lot of money and aggravation. Says Corbett: "Buying a home is one of your major purchases in life. Why would you want to do it without an expert guiding you? That's like saying, 'I'm going to do my own brain surgery so I can avoid a hospital bill.'"
Decide where you want to live. "When you buy a home, you're not just buying a home—you're buying a neighborhood," Corbett says. Everyone's needs vary, depending on their stage of life: Couples raising a family care about the school system, safety and job opportunities; singles pay close attention to entertainment, nightlife and the percentage of unmarried residents; and retirees survey the nearby hospitals, senior care and recreation activities, such as golf or tennis.
Thanks to a variety of online resources, evaluating these characteristics is relatively easy. Trulia.com, Zillow.com and Realtor.com are good starting points for general information. Those looking for a breakdown of a town's crime rate can use NeighborhoodScout.com's detailed crime maps. Gauging the dating scene requires just a quick search for "best cities for singles." For other areas of interest, like entertainment or activities for retirees, homebuyers are better off contacting state or local community boards.