House Purchase: Making an Offer
Although houses prices have dropped by up to 50 percent in the last two years, this does not necessarily imply that housing has become any more affordable to larger numbers of people.
Over the last 18 months, the income of many people, although fortunate to keep their jobs in the current recession, has also fallen, because of income reductions and tax increases. In addition, it is much more difficult to obtain the mortgage needed to purchase a house or apartment, so for many people the dream of a house of their own, despite falling house prices, is still as far away as ever.
Another major problem that today’s potential house buyers have is in trying to estimate the price and budget for the mortgage repayments. Nobody wants to waste money on renting when instead they could be repaying a mortgage and getting a house that they can call home. But, at the same time, nobody wants to pay more than they absolutely need to for a house or apartment.
Fears about a possible property tax, as well as potential changes in the budget, have made many people decide to continue to wait and see how things develop before making an offer for a property that otherwise would be very attractive to them.
Although rental prices are also declining, from the tenants point of view, paying rent each month is still wasted money. In a “normal” housing market, tenants could be using that money to pay off a mortgage and eventually own their own homes.
There are no official statistics regarding house prices and in the current market, buyers are now forced into doing a lot more research to find out the minimum amount the seller is willing to accept for their property. Asking prices, even if they are displayed, are likely to be out of date very rapidly. Buyers need to make enquiries from other estate agents in the same location of the property they are interested in to discover the actual selling or valuation price of similar properties.
By keeping an eye on property websites, newspaper advertisements and estate agents windows, buyers will get to know those properties that have been on the market for a long time, say over 9 months and they can adjust their offer price accordingly.
Another point for buyers to consider is the possible depreciation in house prices in the short term. Again, careful research is the key here. Buyers should monitor the prices of different locations to find out which areas had the least fall in prices and include that in the list of reasons for making an offer to a particular house seller.
Buyers also have to decide on the mortgage package that’s right from them. Fixed rate mortgages may make more sense to today’s house buyer. Although lenders will charge a substantial fee to allow you to switch to another mortgage, fixed rate mortgages shield buyers from the steadily rising costs of variable rate mortgage deals.