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New Rules for Buying PreConstruction 450 Views :: 4 Comments :: :: Real Estate, Investment, Second Homes New Rules for Buying a Home Before It's Built As the housing market has cooled, the developer’s mindset has changed. Rather than construct new developments quickly and wait for the buyers to flood in, more developers are relying on preconstruction sales to determine whether or not to break ground. Here’s some advice for any buyer contemplating a preconstruction purchase: Negotiate an exit strategy in your sales contract, especially as lead times for construction grow longer in some markets. For example, state that if the builder doesn't break ground by a certain day, you can get out of the contract. If you're deposit money is going to sit there for an extended period, as the developer to pay interest. Get in writing what changes that can be made to the project once the sales contract is signed. Finishes and appliances might not be set in stone at the time you sign the deal. Try to find out the current state of the local market and gauge whether the developer is offering incentives to lure new buyers – which, though attractive to buyers in the short term, can put a downward pressure on prices. Check out the Texas Gulf Coast Online Buyers Club for an even better way at TexasGulfCoastOnline.com/BuyersClub.aspx Simple strategies to survive a real estate down cycle. Last year the question was whether the housing boom would slow down. Now it's how can we take advantage of it? The numbers tell a confusing story. For existing homes, buyers are trickling back into the market - sales inched upward even as the median home price fell by 3.5 percent, the largest year-over-year drop on record. On the new-home front, sales fell, but the median price crept upward. For homebuilders, cancelations are up and orders down. The White House revised its GDP forecast downward due to a housing decline that's unfolding faster than expected. If you were lucky enough to have bought a couple of years ago, the 23 percent price growth in 2004 and 30 percent in 2005 should cushion any blow. But buyer, beware. If the forecast holds true, a home purchased today could sell for less two years from now. And that doesn't account for the additional toll inflation can take on the true value of your asset. But let's keep all this in perspective. If you're like so many other homeowners, the value of your abode has no doubt appreciated handsomely. Sure, you may not be able to cash out for as much as you could have gotten last year, but we're betting you can sell it for a lot more than you would have gotten five years ago. And remember that your home is your castle, not your 401(k). It's a place to shelter your family and rest your head. So while it's wise to keep the near term in mind when making decisions, long-term perspective is what really counts in the real estate game. What to do? Whether you're buying, selling, or staying put, here are some simple strategies that can make a big difference for you and your home. Sellers: Lower your expectations As painful as it might be to realize that your house isn't worth what you thought, asking too much in a slow market is a mistake. You'll also need a reality check when it comes to the physical appeal of your home. In the days of bidding wars and waiting lists, buyers were so happy to land a house that they scarcely noticed carpet stains and chipped paint. Today they are picky about the cosmetic stuff. Take advantage of flat fee listing services to save on commissions and apply that savings to reduce your price. See the Texas Gulf Coast Online Flat Fee listing service for details at TexasGulfCoastOnline.com/FlatFeeMLS.aspx. Don't play a game of hoping the right buyer will come along just in time. Buyers: Drive a hard bargain If you're purchasing from a developer, push especially hard. They can't afford to wait. Builders are doing anything to move their inventory, because it costs money to carry it. To compete with the big boys, sellers of existing homes are also sweetening the pot. Feel free to ask sellers to cover closing costs or several months of mortgage payments. Consider renting If you got out of the market when prices were high, bank those proceeds. Step away from the exotic mortgage A lot of homeowners out there are living under a roof they soon won't be able to afford. Of all the nonsense that the boom has wrought, little has been crazier than the proliferation of adjustable-rate mortgages, or ARMs, often called exotic mortgages because so few people understand them. Shop for a rate drop With loan volume dropping, banks are willing to negotiate to get your business. Keep an eye on your equity Lay off the home leverage, and go easy on the remodeling projects. Whether you are buying or selling, TexasGulfCoastOnline.com and Alice Donahue Real Estate have put together special programs and strategies to help you come out ahead in today's market. Contact us today and find out how!