Avoid These Down Market Buyer Mistakes

The real estate market has experienced its most significant slide in years, and homeowners are unloading property at rock-bottom prices. Now might be the time to buy, provided you can avoid some common mistakes.

Homebuyers should act like investors. When you buy in an inflated market, you risk spending money when the home's value is peaking. Buying during a down market like this one, however, allows you to "buy low," which ultimately allows you to make a greater profit when the market heats back up.

With current home values tanking, it's an ideal time to buy if you can wait for home prices to rise again. Take advantage of this opportunity, but be sure to avoid some down market buying mistakes.

It's still location, location, location

Even though home prices have fallen in many areas, there are factors other than price to consider. If the home is in an area experiencing an economic decline, for example-which may be due to crime or loss of a particular industry-there's no guarantee that the home values will climb in the future.

No matter how low the price appears, research a variety of other factors. Is the home near good schools? Are the property taxes reasonable? Has the crime rate risen? Has a major company shut down or relocated? If all the factors turn out to be positive, and you still can buy at a low price, you may want to make an offer.

Work the agents

Sellers and real estate agents are feeling the pain during this down market. Agents who have grown fat on the booming markets from the last several years are finding that they need to cut their staff and lower their commission in order to remain competitive. Many are using every sales tactic in the book to sell homes.

Use your considerable leverage to drive their commissions down. Interview a number of different realtors, and comparison shop. Don't be shy about asking for a lower rate, and under no circumstances should you feel guilty about taking advantage of the situation. The real estate business is a roller coaster ride, and the veterans who survive know this and understand how to roll with the punches. That includes lowering their commissions when home values are tanking.

Mind your mortgage

Because so much emphasis is put on finding the home and negotiating with a realtor, many homebuyers ignore one area where they can realize significant savings: their mortgages. In good times and in bad, you should always shop around for the best rate and the lowest fees you can find.

When managing your stock portfolio, hopefully you adhere to the saying "buy low, sell high." The same logic applies to the real estate market. Take advantage of the lower prices, but also be sure that the home you buy is in a great area, and you get a low-cost mortgage at a good rate. If you take this solid overall approach, you'll reap the benefits of a good real estate investment.