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Web Extra: Consumer Reports: Housing market still on solid foundation
Published in the Asbury Park Press 04/24/05
Despite years of dire warnings from some economists that the housing
boom is about to end, it hasn't. Indeed, last year prices rose even
higher -- about 11 percent nationally, according to government figures.
That may prove a burden for buyers, but for sellers, it can mean a bonanza.
Yet there are signs, at least in some communities, that housing already
is overpriced, raising doubts about how much longer big gains can
continue.
In some parts of the country, job losses and local
economic downturns have slowed appreciation. At the same time, property
taxes are rising across the nation, squeezing many homeowners on fixed
or limited incomes.
Other signs that bear watching are the
portion of home buyers who are purchasing for investment or vacation
use -- it's up to 36 percent, higher than previous estimates -- and how
rents track with house prices. If investors are commonplace and rents
are declining in relation to prices, the area may be on the brink of a
drop in values.
If you are thinking of downsizing to a smaller
house or less-expensive area, there's incentive to do so now, while
prices are high and demand is still b. (Check the current state of
your local market by talking to real-estate agents or a reputable local
appraiser.)
Long-time homeowners stand to gain the most: People
who have been living in their homes for as little as five years should
realize profits in most markets; homeowners who bought 20 or more years
ago have seen their homes triple in value.
The real-estate
industry has seen changes, as well. Time was, selling a house followed
a fairly simple scenario: You hired an agent, paid a 5 to 7 percent
commission, and moved on.
No longer. A batch of real-estate
services have emerged, many of which were barely noticeable a few years
ago. In return for a lot of extra effort, you can save thousands of
dollars selling your home on your own through Internet do-it-yourself
real-estate agencies such as ForSaleByOwners.com and Owners.com. Most
of these national Web sites charge less than $200 for their basic
services, or a few hundred more if you add access to the Multiple
Listing Service agents.
Then there are the regional and local
sites. Discount brokers, such as Foxtons in the Northeast and Ziprealty
in 10 states and Washington, D.C., offer some of the services of
real-estate Web sites, along with broker assistance, for commissions
that may be as little as half the going rate.
Not all is simplicity, however. Real-estate agents point out that there's more to consider than cost. Some agents won't show do-it-yourself listings because they don't want to deal with uninformed or inexperienced sellers and lower compensation. "They know they are going to have be doing a lot more work," says Anthony Marguleas, a real-estate agent in Pacific Palisades, Calif. Sellers have to make time to show the home to buyers and negotiate the terms of sale.
If you decide to use a Web site or discount broker, hire a qualified real-estate attorney to handle contract, title issues, and necessary disclosure statements. (One couple we spoke with who did it themselves saved about $27,000 on the sale of their $475,000 house by using a Web site and paying an attorney $900.)
If you go the traditional route and engage an agent, try to negotiate a lower commission. Your leverage is greatest if discount brokers are active in your area.
Either way, have your home inspected by a professional inspector. That way, you can make any necessary repairs before selling to minimize last-minute surprises and concessions.
Visit Consumer Reports' Web site at www.consumerreports.org.
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