Buyers really have it good in today’s market. In some cases, too good. I have found in several circumstances that the extreme number of homes on the market right now is causing an interesting problem. The wide selection of choices available is causing some buyers to get “burnt out” of house hunting.

The problem begins with the buyers trying to see every home available in a certain market range. While this sounds like a pretty good strategy if you’re buying a home, consider that depending on the area and price range, a search of all homes available could yield hundreds of homes in the initial search with between 5 and 10 new homes appearing for sale every day. At first, buyers feel like kids in the candy store, but soon realize that going through hundreds of homes takes a lot of time and energy. Unfortunately this has caused many buyers to just give up on hunting altogether in frustration.

Back when we were at the crest of the housing wave and homes were selling rapidly, seeing every home out there made sense - there was less selection and buyers needed to often make quick choices. This made a “larger to smaller” approach to home searching make sense - there was a much smaller pool. In today’s market where there is an extreme housing glut, a “smaller to larger” approach makes more sense.

Buyers have to shift gears and be more selective in the initial searches. There are many great homes to choose from so chances are, you’ll be able to find exactly the home you’re looking for - it pays to be really picky in the beginning. If you don’t find what you’re looking for at first, then widen the search. Just remember a couple ground rules: the good homes still go fast even in today’s market. If you spend a week going through all your choices, by the end of that week, some of the best ones on your list will be gone. It’s better to start with a smaller list and add to it if you don’t find what you’re looking for. Also, don’t be afraid to go ahead and make an offer if a home you see fits your picture. I’ve worked with buyers that found the perfect home but wanted to continue to look and see “what else is out there” only to find that 3 days later, another buyer bought their perfect home while they were out looking at dogs. DONT LET THIS BE YOU!

Finally, it’s very important that you work closely with your REALTOR and be specific about your search requirements. If you’d only buy a home with a basement, it doesn’t make sense to see homes without one. If you’re thinking of looking for a home to buy this year, I’d love to talk to you about how I can make the search process easier. Just give me a call and I’d be happy to meet with you: 630-346-1041.

If you’re in the market to buy or sell a home, eventually you’ll encounter an appraisal. Most folks know that it deals with home values but many might not understand exactly how important a role the appraisal plays in the home buying process.

First it’s important to distinguish between two different types of home value estimates. First, the report a real estate agent often does for a home seller in order to arrive at a list price for the home is commonly known as a Comparative Market Analysis. However, this is almost never an actual “appraisal”. An appraisal is a home value estimate that is compiled by a licensed real estate appraiser. The appraiser is often hired by a lender, bank or other mortgage company to determine an official value of the home for loan purposes. The distinction between a market analysis and an appraisal can sometimes be very small but in other ways very large. For example, the way a real estate agent prepares a comparative market analysis is by examining the sales prices of similar properties in the area (known as “area comps”). A real estate appraiser may use this same technique to arrive at the value of the home, however appraisers often have several different methods they can use.

Perhaps the biggest distinction between the value arrived at in a comparative market analysis and that of an appraisal is that only an appraisal is accepted by lenders as an “official” estimate. This creates an interesting situation because the appraisal can sometimes differ from the value arrived at in a comparative market analysis, especially if the appraiser is using a different method than pulling the “comps”. This is perhaps one of the biggest issues that can occur between buyers and sellers after an offer on a home has been negotiated and accepted. Consider the following situation:

A real estate agent estimates the value of a home using area comps at $325,000 and a buyer comes allong and offers full price for the home. Later, the lender hires an appraiser to do an official appraisal on the home and they use a square footage method for determining the value and arrive at a value of $300,000. Now there’s an issue because the lender is unwilling to lend more to the buyer to purchase a home than the home is actually woth. So the end result is, in order for the sale to progress, the seller must agree to reduce the sales price by $25,000.

In many ways, a home is worth what someone is willing to pay for it, however, that value must still pass muster by the appraiser. This is perhaps the biggest reason why pricing a home correctly from the beginning is so important. Many sellers have the idea that by pricing the home high initially, they can always “get lucky” and find a buyer willing to pay more for the home. However, because the home has to eventually pass the appraisal, even if the home were to sell at an inflated price, it wouldn’t pass the appraisal.

The writing has been on the wall for a while, yet many have been hesitant to read what it says. Many Americans are finding themselves getting deeper into debt. Part of this problem likely comes from the expense of owning a home of thier own. For a rising segment of homeowners, the cost of home ownership is forcing a tough situation into a dangerous one; creating a “foreclosure crisis” that will likely last several more years.

Earlier this year, current figures released by the Department of Housing and Urban Development are showing an alarming upswing in the rate of foreclosures. In some areas, of all home owners who were extended sub-prime loans, the rate of default is as high as 14-20% when 4-6% is considered “healthy”.

This data has been all over the news — the stock market has been in upheaval. Sub-prime lenders are usually experienced in extending financing to borrowers with credit problems, unable to verify income, job status or other factors that make them a poor fit for traditional financing. In the past few months, many major players in the sub-prime market have sold off operations or in some cases simply closed their doors and gone out of business. Just as their clients were unable to afford the escalating expenses of homeownership, many sub-prime financial companies found it impossible to absorb the foreclosure rate we are now seeing.

The backlash doesn’t stop with the sub-prime market. Even traditional lenders are increasing requirements and placing more scrutiny on the loan approval process. This begs the questions of how did this issue ever begin in the first place?

A fair amount of the responsibility can be laid at the feet of the borrowers themselves. In this age of “big is best” many Americans see a big home as an indicator of success. This pushes many buyers into trying to purchase a larger, more expensive home without enough thought to the affordability of one. Often buyers push the levels of affordability and end up in a difficult situation or worse.

Blame can also be laid at the feet of some financial institutions. Who is better informed as to how much house debt a borrower can afford? The current debt-to-income ratios are either being ignored, or the types of loans that lenders are providing are not good choices. Loans like 28/2 and 27/3 loans with fixed teaser rates that adjust after 2 or 3 years with a balloon or margin are just a few of the loans that have caused borrowers to get into trouble.

Of course the end result of this mess will be better qualified and better educated home owners but did things really have to go so far? We’ve seen foreclosre problems hit most of the large regions we work including Naperville real estate, St. Charles real estate, Montgomery real estate and Yorkville real estate. Frankly, I sometimes think they did. Lately it seems like it takes a good deal of shock to get some things back on track. In the mean time, if you are thinking of purchasing real estate in the next few years, it’s important that you start talking with your local REALTOR or loan officer and make sure your finances and credit scores are in order before you continue with applying for a loan.

For many buyers looking for move-up homes, new construction is a popular option. With current builder incentives, buying a brand new home has also become much more affordable. However, many buyers are finding great deals in the resale market in the Fox Valley. It’s not uncommon to find homes $20,000 - $50,000 below their 2005 levels as more and more sellers are forced to reduce price as the market continues downwards. For many buyers, the general stability of the resale market is a more popular choice than new construction. Granted, we’ve seen prices drive downwards over the past two years, but compared to the unknowns of buying in a brand new subdivision, many buyers are willing to trade being in a home noone else has lived in for being in an already-established neighborhood. If you are considering new construction, it might be a good idea to also see what’s available to you in the resale market. You may be able to find a home with a good deal of equity just waiting for the next market surge in the next couple years.

If you’re buying or selling a home, your choice of a real estate agent to represent you is very important. Not all agents are equal in terms of the services and support we provide. In many cases, your home is your most valuable asset. You need to take some time and make sure your agent is working hard for you. My tip of the day comes from my guide titled: “10 Things You Must Know About Your Real Estate Agent” and focuses on some of the things you should be watching for at your first meeting.

1. Pay attention to way the agent acts on your first meeting. Dress, body language, confidence – these are all tell-tale signs that will tip you off as to how serious and experienced they are. Let’s face it, real estate is a business – you want to hire an agent that will treat your greatest possession with the respect it deserves. Dress is a big indicator – a shirt and tie should be minimum dress requirements for a first meeting with a client, if not a full suit (or formal dress for a woman). Any agent that dresses down for your appointment might not be taking their job seriously enough and probably isn’t someone you want to hire to market your home. Also pay attention to body language and confidence – does the agent seem at ease in front of you or do they seem nervous? Is their presentation smooth or fraught with hesitation and questions they weren’t able to answer? Does the agent seem difficult to talk with or not willing to explain details to you? You are looking for an agent who gives you the respect you deserve by dressing for the occasion, is knowledgeable and at ease speaking with you (a potential client), will take the time to answer your questions honestly and acts like they have done many such interviews in the past.

Today’s tip of the day is from my 10 Low Cost Indoor Real Estate Fixes guide and focuses on ways you can improve your bottom line by paying attention to what’s beneath your feet. For additional guides please visit my Illinois Real Estate website.

1. Look Down, Look DownThis is an important factor for many buyers – what type of flooring you have and most importantly, what its condition is. I’ve literally seen buyers walk away from a home simply because the carpet was overly dirty. You can prevent negative appearance or outright rejection by making sure your floors look their best. If you have carpets, rent a steam cleaner for the weekend and put it to use. They are rather inexpensive and can really rejuvenate carpets, especially older carpets. If you have laminate or hardwood, use a floor cleaner and when it dries, a no-slip floor polish. Make sure you do this in advance of any showings or open houses – you don’t want the house to smell like the cleaning isle of your grocery store.