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Home buyers who do their research will find opportunities

January 11, 2009

In some ways, it's both the best of times and the most challenging of times for home buyers. Many properties are on the market for amazingly low prices, like the clearance merchandise now overloading the shelves of retail chains. Moreover, mortgage rates are exceptionally low.

Even so, many who hanker to buy a first home, or to acquire that vacation house they've long yearned to own, are fearful. They'd like to take full advantage of the current housing situation, but they're apprehensive about overpaying, says Leo Berard, charter president of the National Association of Exclusive Buyer Agents (www.naeba.org).

Still, he says this could be the best opportunity in years for people who want to purchase a home and feel comfortable enough to do so because their jobs are stable and their finances are in order.

"Prices are very attractive compared with two, three or four years ago. It could be the right time for action if you want larger housing or the quality-of-life benefits that come with a vacation getaway," he says.

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Here are pointers for would-be home buyers in the current market:

· Recognize that there's always some element of risk associated with reward.

A few years back, when mortgage money was often too readily available, many buyers were focused on "flipping," the practice of buying properties on the assumption that they'd appreciate rapidly and could then be sold for a quick profit.

But many who tried this game failed - teaching others a cautionary lesson about how hard it is to make speculation work, especially in a buyers' market.

On the other hand, those contemplating the purchase of a property for their family's use, and who intend to own the home for at least five years or longer, could be making a prudent choice to buy now.

Obviously, it's the wrong time to buy if you're deeply in debt or one of the jobs in your household is at risk. But if your finances are solid and buying a home now will make your life better, or give your children access to better schools, the possible risk of overpaying slightly could be well worth the reward.

· Use forethought in selecting the neighborhood where you plan to buy.

Too many home buyers let emotion dominate their decision on where to live and pick a neighborhood too quickly, says Michael S. Knight, financial adviser affiliated with the Garrett Planning Network. Which neighborhoods are most likely to hold or gain value in the future? Knight says that top-quality public schools are critical, particularly now that private schools are out of reach for many families. Access to mass transit is on the list.

When talking to real estate agents, ask them to show you the neighborhood's amenities on a map. Also, ask them to assemble data for you on sales trends in the neighborhood, including the median time it takes to sell a home there.

· Seek out sellers who are highly motivated.

It's no secret that homeowners in a number of neighborhoods must sell their property or have the bank that holds their mortgage take their home away involuntarily. And foreclosure is typically a traumatic event for the families who go through it.

As a would-be buyer, you may feel uncomfortable about seeking out owners who must sell quickly due to the loss of a job or mortgage payments that are too high for their income. But, as Berard says, you might be doing the sellers a favor.

How can you identify highly motivated sellers before the foreclosure process begins? Your agent can often find them through the Multiple Listing Service. An additional approach, recommended by Berard, is to walk around the neighborhood on a weekend, striking up informal conversations with residents there.

· Be especially cautious before deciding how much to bid on a property.

Once you've chosen a neighborhood where property values are solid and you've found your dream home there, you'll want to carefully assess its true current value before formulating a bid, Berard says.

Ask your agent to provide you with statistics on properties that have sold in recent weeks. And, Berard says, make sure this analysis takes into account the "distress sales" that have occurred lately, which often come at a sacrificial price for the sellers.

Copyright 2008 Ellen James Martin

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