If you're considering buying a home in today's crazy market, I would encourage you to think carefully about what kind of buyer you really are before jumping in. With the chaos that I'm seeing in the Bay Area and beyond, there are fantastic opportunities to make some great deals, but that ALSO means, and I don't want to be too crude (I have a reputation for subtlety and finesse to maintain, after all ;), that there are tremendous chances to really screw yourself up.
Here are the three types of buyers-where do you fit?
WHOLESALE Buyer (WB)-
This kind of buyer buys low and looks for a quick turnaround. A WB needs to obtain a property in good condition that can resell fast, at a profit, and in some cases has a buyer lined up before the title transfer goes through. In this kind of market, buying like this can be tricky because many properties available through foreclosure will need significant updating/fixing before they can be sold on. A Wholesale Buyer needs to offload properties quickly and needs a good network of potential buyers in order to turn around a property as soon as possible. There are good bargains available, but you have to have a good eye and really understand the pluses and minuses of a given house before moving forward, or you can be stuck with something that has no appeal to the next buyer.
Investment Buyer (IB)
An IB buys and plans to hold the property for awhile. Maybe he'll rent it out, maybe she'll spend a chunk of change to update and modernize an older home and recoup the money in a few years when prices rise. IBs will need to have good down payments (see my earlier post about cash becoming king again). If this is the kind of buyer you are, you must have firm financial footing to be able to support the initial cash outlay plus on-going charges. If you want to buy and hold, this is a good time for that if you're ready to play landlord or are able to pay for remodelling out of pocket with no need for additional loans in this credit-tight market.
Retail Buyer (RB)
Call him a family-guy, or call her a modern woman...but this buyer is looking for something for themselves. If you work smart, you can take real advantage of what's going on right now. First, have a very very good sense of your finances and what you can afford to pay, not just right now, but in 5, 10 or even 15 years from now. Don't count on a home's value skyrocketing and your mortgage becoming a giant ATM machine to pay for college for your kids or the automatic refinance option in a couple of years. And even though cash is becoming king again, if you don't have the $100K+ that might mean in the SF Bay Area housing market right now, there are some good options to explore, especially as more and more sellers are getting creative (in a good, REBELLIOUS way, not a scheming high-commission, pass-the-risk-on mortgage broker kind of way). I'm seeing lease-to-buy deals happening, I'm seeing co-signing becoming big again, and I'm even seeing some private sellers willing to work with mortgages that are amortized over a few more years than normal to keep payments rational. Lastly, stop thinking of your home as an investment that you'll cash in some day-start thinking of it as a place you want to be, where you want your family to be, and where you want to stay for awhile.
So, yeah, today's market is crazy. It seems like loans are tough to find, foreclosure properties carry high risk, and maybe you'll have to sit on what you buy for awhile. But, if you know what you're looking for, and you REALLY have a good idea of what kind of buyer you are, then you can surf the chaos like a pirate ship riding a wave.
Buy Rebelliously!
Larry
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