That is the million dollar question. The fact is that no one knows for sure exactly where the bottom of the market is. On any given day, you can find a variety of opinions on the subject. Although no one knows where the exact bottom is, it is clear that we are in a bottoming process right now. Home prices and interest rates are definitely closer to the bottom than they are to the top. We still have some more economic hurdles to deal with – the credit card industry, commercial real estate, job losses…but it is unlikely that interest rates will go much lower than they are right now. On Tuesday last week, Ben Bernanke (Chairman of the Federal Reserve) said, “the Fed needs to make sure it raises interest rates at the appropriate time, and not keep rates too low for too long.”

According to the Mortgage Bankers Association, 78% of all mortgage loans being done right now are refinances. It is stunning that in this unique market of 40-year low interest rates and great home prices, more people aren’t taking advantage of this incredible opportunity.

What is the fear? It’s simple. People are concerned that if they purchase a home today, it may be worth less tomorrow. But if that were to happen, does that mean that you would lose money?

Let’s take a look and see. Here is an example of a home that was purchased for $400,000 with 20% down and an interest rate of 4.75%, along with a comparison of what it would look like if this homebuyer decided to wait and sure enough, one year later the price had dropped $50,000 to $350,000. Interest rates, however, are likely to have climbed back up. We’ll use the average interest rate over the last 24 months of 6.250% for this example.

As you can see, by waiting, even though the price of the house was $50,000 less, this homebuyer is actually going to spend $55 more per month.

Over the 30 year life of the loan, the house that was priced $50,000 less, will actually have cost $9,705 more with a higher interest rate.

Even though he put $10,000 lesss down, he will spend $19,705 more in actual payments, $59,705 more in interest.

So much for waiting for the bottom to save money. As long as you are buying a home for the long term, not just to flip it in a few months or years for profit, you may actually be better off to buy it now when the combination of interest rates and home prices is so low, than you would be to try and time the bottom of the market, which is impossible to do anyway.

It’s a great time to buy Seattle real estate. Interest rates are at record lows, home prices have dropped dramatically, and inventory is high. In all the years that I’ve been in the real estate business, I have never seen this combination. When rates are low, house prices are typically high and inventory is low. When home prices are low, interest rates are typically high. I would like to encourage buyers to take advantage of these opportune times.

I had an appointment to show a home in Bothell, WA this evening. I arrived early at the house to turn on lights and make sure everything was in order. There was a note on the front door requesting that we use the back door. I collected the keys from the lock box and proceeded to the back of the house. The key opened the dead bolt but the door knob was locked.

The only way into the house was breaking and entering. This, however, was not an option because it’s against the law for agents too. I had no choice but to re-schedule the appointment with my first-time home buyers. Understandably they were disappointed.

I’m sure you remember what it was like when you purchased your first home. You were probably a little unsure and anxious, and every little mishap caused you to second guess your decision. This is why it’s so important to make sure things go as smoothly as possible for potential buyers and their agents.

If you’re a seller, I recommend that you make access to your home easy and inviting. One house I showed in Snohomish, WA a couple of months ago had a plate of cookies on the table for my buyers. That kind of neighborliness was refreshing and helped my buyers to feel welcome. They stayed a little longer than usual.

Try not to require agents to jump through a lot of hoops to show your house. ‘By Appointment Only’ homes are very difficult to arrange when there are several schedules to juggle. Typically an agent will show several homes at a time, and it is a real temptation to avoid all the homes that make that requirement.

I’m grateful for all the sellers that do what they can to remove all the obstacles that would cause a buyer to second guess their decision to consider a home.

It is fascinating to watch what’s happening to the economy worldwide. There has been a definite shift in attitudes towards capitalism in the last few years. I found this Wall Street Journal video to be very interesting.

What to do? What to do? A seller places their home on the market and it just sits there. How do they attract a buyer? Are there any buyers out there? Yes, but for a price.

The “invisible price” is the price where you are receiving the most money for your home that the market will bear.

What is that price and how do you find it? I’m a real estate professional and I’m supposed to know the answer to this; but I don’t. Some agents have suggested to their seller to start at a reasonable price and drop their price weekly at even increments until a buyer comes along. I’ve seen homes drop weekly between $10,000 and $50,000. Incredible.

But here’s what my buyers are saying, “Hey, the longer I wait, the less I’ll have to pay.” They’re not concerned about losing out to another offer because there’s many homes from which to choose and more are arriving on the market every day.

One of my buyers was interested in a home that arrived on the market at $260,000 and watched the price drop weekly by $10,000 until it came down to $180,000 and settled with the seller at $175,000. What if the seller started at $225,000? I’m certain that they would have received much more for their home.

It’s advisable for sellers to find that “invisible price” and place their home for sale there originally. Where is that invisible price? Well, here’s what it’s not:

• It’s not the price of similar homes in your neighborhood that have been on the market for several months. (Even if your home is much nicer than all your neighbor’s homes.)
• It’s not even the price of similar homes that have sold in your neighborhood in the last few months.

What is it then? It’s the price where buyer’s are certain that they won’t regret the price of the house 1 year from now. I have been asked by more than one buyer, “What if I buy this house and it’s worth 10% less six months from now?” Is there something special about 10%. Maybe.

Let’s say your market analysis comes out to $300,000 based on sold comparable homes. I believe you will need to price your house for no more than $270,000 and figure on taking an offer for at least another 5% below that.

This may seem over the top to a seller, but if you don’t have to sell right now; don’t sell. If you do have to sell; you’ll need to be an aggressive seller to match the mood of this market’s aggressive buyer.