The recession left a number of local housing markets in distress, littered with foreclosed properties and homeowners whose options were limited. And while circumstances have gradually improved, with home prices even reaching pre-downturn levels in certain areas, there are still many corners of the real estate world where the effects of the subprime mortgage crisis are very evident.
While these markets may be considered down, that doesn't mean they can't still present plenty of opportunities for the savvy home buyer. As in any residential area, if research is properly conducted and priorities are clearly laid out, shoppers can secure an investment with the promise of a solid return and a comfortable living situation. If you're considering buying in a perceived down market, here are a few other points to consider before committing:
Make a list and stick to it
When sorting through a neighborhood or part of town where home values have dipped, you might assume concessions have to be made. That may be true in terms of the amenities within walking distance or the age of certain appliances within the home, but you don't have to settle in every capacity. If a large kitchen with a dishwasher is important to you, make it a point to find a home that meets those expectations. You may need to think more abstractly, considering renovations and picturing certain parts of the house with more up-to-date additions, but those are comparatively small sacrifices given the money you stand to save on a home with a lesser overall price tag. More importantly, you can afford to be a little picky when it comes to your true priorities if the local market has a lot of distressed inventory, since competition probably isn't heavy and older homes in lower-valued areas tend to stay on the block longer.
Be a hard barterer
Again, down markets tend to make sellers more uneasy, so you can capitalize by negotiating the terms and conditions you truly desire. In many places where prices fell precipitously during the recession, making a sale was not - and still is not - a guarantee. This leaves you, as the prospective buyer, in a position of prohibitive leverage until the deal is officially closed. Having done your research and gained a feel for what prices comparable homes have sold in the area, you can be confident and unflinching in your terms. You don't need to do too much haggling for a home that's otherwise going to have difficulty making its way off the market. Make it clear to the seller that if your conditions aren't met, there are other options in the area that you're perfectly comfortable exploring.
Don't lose sight of your budget
It can be easy to get caught up in the sale price of a home. It does, after all, dictate what sort of mortgage payments you'll be making and set the baseline for how much the property can appreciate in value. However, accumulating worth on your investment in a down market means relying on a lot of contingencies, all of which must be factored into your bottom line. Remember that, especially with older and/or distressed homes, a home inspection is of the utmost importance. Whatever issues are detected by the property inspection services will need to be addressed. You can attempt to work some of the costs of renovation into a price reduction when you negotiate with the seller, but you shouldn't deviate from your budget for the sake of a home that is going to require so much work that it ultimately diminishes the entire investment.