Should You Try to "Time the
Market"?
One problem with attempting to time your purchase to
the business cycle is that no one can accurately
predict the future. Another challenge is that
interest rates are generally higher during a
depressed market and income may not be keeping up.
For that reason, fewer people can qualify for a home
purchase than in more prosperous times.
Why You Should Not Wait
Plus, this strategy generally works best for
first-time buyers. People who already have a home
usually need to sell it in order to buy their next
one. If a "move-up" buyer wants to buy a home during
a depressed market, that means they usually have to
sell one during the slow market, too. If a seller
wants to sell his home to take advantage of a "hot"
market when prices are fairly high, they generally
have to buy their next home during that same hot
market.
It tends to equal out.
Finally, the business cycle can change over time.
Since 1983, we have had two fairly long expansions
with only a slight recession in between each. You
would not want to wait nine years to buy a home,
would you? You could miss out on a substantial
amount of appreciation by waiting, and end up paying
much higher prices.
The Closing Date
It is absolutely essential
that you include a closing
date as part of your offer.
This way both you and the
seller can make plans for
moving, and the seller can
make plans for buying his or
her next home. Though most
transactions actually do
close on the right date, do
not be so inflexible that a
delay creates insurmountable
problems.
For example, if you are
renting and need to give the
landlord notice that you are
moving out, you may want to
allow a little flexibility.
Otherwise, if your purchase
closes a few days late you
could find yourself staying
in a motel with your
belongings packed in a
moving van somewhere while
you pay storage costs.
There are also times when
closing can be delayed by
weeks, through no fault of
your own. Have back-up plans
prepared for such a
contingency.
Escrow and Settlement
For example, you are going
to need an escrow or
settlement company to act as
an "independent third party"
between you and the seller.
Without having a third party
involved, how do you know
that when you fork over the
money, you are going to get
the deed? This is the type
of service provided by
escrow and settlement. They
will hold your deposit and
coordinate much of the
activity that goes on during
the escrow period.
Since this third party is
very important to both you
and the seller and both of
you will pay fees to this
company, it is important to
agree on which service to
use. Therefore, your choice
should be part of the offer.
Since you do not buy a home
every other week or so, you
are probably unfamiliar with
companies that provide this
service. Your agent will
make a recommendation. You
have the authority to accept
this recommendation and
include it in your offer, or
make your own choice.
Keep in mind that the seller
will also have a preference
and this may be a point of
negotiation in a
counter-offer. It has become
customary that one side will
choose the escrow/settlement
agent and one side chooses
the title insurance company.
Even so, everything in real
estate is negotiable. |
