How to See Through a Realtor's Pitch

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What’s the best time to buy a home?

Your real estate agent probably has a ready answer: now. It’s the same answer you’d have heard a year ago, two years ago or five years ago. It’s the same answer you’ll get a year from now.

Because the agent gets paid only when a home sale closes, there’s little incentive to discourage anyone from buying at any time, regardless of market conditions.

When home prices were peaking a few years ago, the same agent might have urged you to buy before homes got even more expensive. Many buyers swayed by that pitch are regretting it now that their homes are worth far less than they’d paid.

So it’s best to be armed against the standard buy-now arguments.

Traditionally, most agents’ sales pitches were based on an article of faith: that home prices always go up, so that any home purchase would make money over time. That was never completely true, as there have always been some neighborhoods where prices fell. But the recent collapse in home prices nationwide should put that argument to rest. Many homes, perhaps most, will appreciate given enough time, but that’s not guaranteed.

If an agent presses this argument, point out that it’s hard to imagine home prices rising very much anytime soon when growing numbers of foreclosures are boosting home supplies and rising unemployment is cutting demand.

Right now, your agent is also likely to argue that mortgage rates are too low to pass up, and could rise. Rates are indeed very low, with the average 30-year fixed-rate mortgage charging just more than 5%, according to the BankingMyWay.com survey. Given long-term patterns, it seems very unlikely that rates could fall much further, though you might beat the average with the search tool.

Note that some of the best market-beating deals come from small local and regional banks and credit unions. First Niagara Bank of Washington, Pa., for example, offers a 30-year fixed-rate loan at 4.875%, while Bank of America (Stock Quote: BAC) charges 5% and PNC Bank (Stock Quote: PNC) asks 5.25%.

Rates are just one part of the equation. Even if they do rise, you could be better off waiting if it got you a lower price.

Imagine that you bought a house for $375,000 with a 30-year fixed-rate loan for $300,000, charging 5%. According to the Mortgage Loan Calculator, your monthly payment would be $1,610.

Now suppose you waited a year and got the house for $350,000, but that the rate had risen to 5.75%. If you put the same $75,000 down and borrowed $275,000, your payment would be almost the same, $1,605.

Therefore, your agent says, why hold off and perhaps miss the house you really want?

Answer: What about that $25,000 price savings? Buy now at the higher price and you’ll lose $25,000 if the price falls and you have to sell. Even if you keep the house for years, you’ll eventually come out $25,000 ahead if you buy it for that much less.

Of course, this could be a good time to buy, but only if you find a wonderful place at a good price and plan to stay there for six, seven, eight years, maybe longer. That would give you time to recover from any further downturn. If you’re not in this position, it could be better to stay in the home you have or to rent.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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