The time to buy a home is now!

If you’re not seriously considering the purchase of a new home then DON’T READ THIS. Maybe you can just forward it to someone who might be interested.

When I began writing this piece I said to myself, “Keep it short. No one enjoys reading long messages they didn’t even ask for.” When I was done writing it I knew it was definitely too long, but I didn’t remove a single word. I realized that those who are truly looking for guidance in regards to what will most likely be their larges investment ever, will appreciate this article and what it has to say.

"Some men see things as they are and ask why? I dream things that never were and ask why not?" Bobby Kennedy

Is or is it not a good time to buy?

While it’s not a good time for sellers, it’s definitely a great time to buy.
Today’s real estate enthusiast is well informed through a bombardment of cyber information from hundreds, if not thousands, of different real estate websites or internet media reports on the subject. It has given way to a much more educated consumer. However, there is such a thing as information overload. Too much of anything is not always good for you and can tend to become somewhat confusing. Confusion leads to misinformation. Misinterpretation leads to mistakes.

Even though it’s an ideal time to buy a home, buyers have chosen to wait. They were first waiting for prices to come down. Then they heard property taxes were going to change, and that insurance premiums would soon drop.

Yes, we have seen how the seller’s asking prices has changed every few months. The numbers are becoming more and more favorable to the buyer. In the interim, buyers have chosen to wait it out in hopes prices will continue to drop.

Things are not always as they have been promised. We’ve seen that all that was proposed in terms of property taxes and insurance has fallen short of what we had been expecting. “Why not wait until this is resolved and then move in on the great deal?” I too would be thinking along those lines, but let’s take a closer look at all this.

Property Taxes

It was the politicians that started talking about reducing property taxes, or should I say, eliminating them altogether. Remember how they would replace it with a 2% increase in sales tax throughout the state? Well that didn’t happen. They went back and forth trying to come up with a viable solution that both side could agree on. What they came up with was a reduction of approximately $200 a year, if you were lucky. Oh sure, they’re also promising larger homestead exemptions, but that’s only if the proposal gets at least 60% of the votes (It has not yet been decided when this item will be put on the ballot). Even if it passes, you’ll need to think of what you’ll have to give up in return for the larger homestead exemptions…the “Save Our Home” 3% cap.

Who’s to say that although our homestead exemptions are larger and our taxable assessed value seems to be smaller, the millage or TRIM, which is used to calculate our taxes, will not increase way beyond our savings since there is no longer a cap protecting the homeowner from no more than a 3% increase per year.

On a more positive note, since property taxes are also directly impacted by mortgage fraud. Homeowners in neighborhoods saturated with mortgage fraud could see their property taxes reduced as law enforcement gears up for a countywide crackdown on the pervasive white-collar crime, according to Miami-Dade County Mayor Carlos Alvarez and Glenn Theobald, chief legal counsel for the county police.

Insurance

And then there’s insurance. What do we know about what’s been going on with this? Back in January, legislation was passed in the State of Florida that all insurance companies issuing policies in this state would have to reduce their premiums staring June of 2007. This would extend to all policies, new and pre-existing upon renewal. The reductions would be gauged by areas most affected by the recent requests for increase in premiums resulting in lower premiums ranging from 17% in the north to 53% in South Florida. What have we seen since June of this year? For the most part - totally the opposite. It was as early as July of this year when insurance companies again began submitting requests to the state for yet another increase in premium pricing.

Who should be addressing these issues?

It was Gov. Crist’s political platform to address Florida’s growing problem surrounding housing. Primarily taxes and insurance. As a matter of opinion, I believe he’s gotten the ball rolling and as a homeowner myself, I can appreciate that. However, there is no question that it’s hardly enough and even the Governor realizes that. Gov. Crist has begun issuing subpoenas to non-complying insurance companies and calling for hearings wanting to know why they’ve chosen not to obey “the law”. The outcome is still unclear.

Mortgages – Helpful or Toxic

Then there are the banks and their new and more restrictive lending practices. This directly affects some buyer’s ability to obtain financing for their purchase, reducing the pool of buyers even further. 100% financing is now a thing of the past. The sub-prime market and mortgage brokers with questionable credentials have taken advantage of non-existing regulatory practices against them to put buyers into homes they would not normally qualify for. In the long run this affects us all.

Adjustable rate mortgages (ARMs) offered more attractive terms for the not so affluent buyer at the time of purchase with the promise of refinancing to a more stable loan further down the road. Well now we see how lenders are no longer willing to negotiate these loans since they were originally acquired by the less credit worthy, usually at the advice of their mortgage broker. These borrowers are now left with the options of paying more as their rate adjusts or face losing their homes. This is the essence of the over inflated market we currently experience and the basis for such an accelerated rate of foreclosure.

But the Fed just dropped the rate by ½ point!

The federal funds rate is what banks charge each other for overnight loans and is the basis for everything from business loans to credit card charges.

The Fed also cut its discount rate -- the rate it charges member banks and institutions for short-term loans -- from 5.25% to 4.75%.

The Fed move will probably trim borrowing costs for business and credit card customers. However, the decision will have less of an impact on mortgage rates. Mortgages follow the Bond index and not stocks. The rate on a 30-year fixed-rate mortgage had hit 6.35% nationally in late June, Bankrate.com said. It dropped to about 5.93% a week ago, but it moved back to 6.02% today. Still very good by all accounts.

There is likely to be little immediate relief for borrowers with many adjustable rate mortgages because the rates on roughly half of these loans are tied to the London interbank offered rate (LIBOR). Libor recently jumped sharply above the Fed funds rate because of the continuing credit crunch in the markets.

Why buy now?

Before asking yourself why you should buy now. You should first ask yourself whether you are the right type of buyer. There is no question that now is the right time to buy. The market elements are in alignment, if you will, for buyers to obtain exceptional deals.

Taking into consideration the previous discussions - First off, a good buyer would not be affected nor have the need for a “toxic mortgage”. The buyer will also realize that any significant reduction to taxes and insurance is unlikely. Yes, there are some expectations, but nothing that can be determined with any degree of certainty.

Prepare yourself for several changes in the banking industry when you apply for your home loan. A credit score in the 6oo’s is favorably looked at by most lenders today as credit worthy and low risk. A good idea would be to obtain copies of your credit reports from all three bureaus and verify that all information is accurate or make any necessary corrections before applying for a loan.

Banks are also looking for the borrower to have a vested interest in the purchase by way of a down payment. This requirement will vary from bank to bank, but they’re anywhere from 5% to 10%.

Pricing has shown signs of decline. With so many properties for sale competing against each other, sellers have no choice but to slash their asking price. “Asking price” being the key phrase. Different sellers have different reasons for wanting to sell. Some are relocating, others are downsizing, and others are in total distress. In today’s market we find that most cases can relate to the latter. Therefore, an asking price is just that, what they are asking. What they expect to get in the way of an offer is totally different.

In addition to reduced pricing, sellers are offering incentives ranging from paying all closing costs, to paying association fees a year in advance, or even escrowing a years worth of mortgage payments for the buyer. These are just a few creative ways that sellers are looking to have their properties looked at first. Developers are drastically reducing their initial prices sometimes by $100,000 and in addition to that, they are also throwing in attractive upgrade packages.

If you are seriously considering a purchase, don’t pass up these great opportunities just because you heard from someone who heard it from someone else that prices are going to get better and that things will change in your favor later down the line.

If you see something you like, be prepared, get pre-approved by a reputable lender, find yourself a Professional Realtor, and walk in and make your offer. Sellers will be more than ready to negotiate with you. They will be glad to know that you have shown interest in their home let alone put in an offer to purchase. It’s probably been months since that seller has had a knock at the door or received a call from a prospective buyer. They will welcome you with open arms.

I hope this has enlightened you as to why the time to buy is now and, of course; I look forward to hearing from you if you choose to move forward. In my years as a Realtor I’ve realized that every buyer and their situation is different. Close attention is required to the individual’s specific needs in order to obtain a gratifying outcome.