10 tips for today's market
Whether you are buying, selling, investing, or staying put, there are smart moves you can make to get the most out of your real estate.
by Ellen Florian Kratz, FORTUNE Magazine writer-reporter

(FORTUNE Magazine) - It never pays to get caught up in group hysteria, especially when it comes to real estate. Conditions vary from town to town, and no national statistics can give you a clear picture of what's happening in your neighborhood. So don't let headlines spook you into making a costly mistake. Even simple steps can make a big difference in the price you buy or sell for. Read on for some advice that will help you make sure you're getting the best possible deal.

If you're a seller ...

Price it right

The worst mistake a seller can make in a softening market is to overprice a home. Even putting a high price on your home to "test the market" for a few weeks (with the notion that you can always lower it later) is a bad idea.

Your goal should be to seal a deal during "the first two or three weeks your house is new to the market," says Lyle Martin, co-founder of Assist-2-Sell, a discount realty firm. That's when your home generates interest from serious buyers who have their radar up for fresh properties. If you're asking too much, they'll move on, and your house will get lumped in with the rest of the inventory. And if it lingers too long, "it can become stigmatized," says Pam O'Connor, CEO of Leading Real Estate Companies of the World. "Buyers will think there is something wrong with it."

How can you be certain that you're pricing it right? Start by checking out your rivals: similar homes for sale in your neighborhood. But the numbers that you really want are the actual prices comparable homes have sold for recently--a market analysis that any good real estate broker will prepare. And don't cling to memories of what houses were commanding six months ago; if your area has seen a slowdown in sales, you're not going to get top dollar. "The silver lining," says Gil Campos, a 25-year Boston real estate veteran, "is that houses priced correctly are selling for what they're asking."

Set the stage

In a faltering market you need to stand out. That's where something called staging comes in--that is, sprucing up your home in a way that encourages prospective buyers to envision themselves living there. The first step is to rent a storage locker and fill it with all that clutter from the attic, basement, and garage.

Also remove any furniture that makes your home look overcrowded. And you may want to sweep your house clean of such personal items as wedding photos, framed diplomas, or children's fingerpaintings--it's difficult for prospective buyers to see your home as their castle if your family's signature is all over it. Tone down unique decor. That nude oil painting hanging in the foyer may turn off buyers. Rooms painted in unusual colors should be redone in neutral tones. "You're not selling your things, you're selling the space," says Barb Schwarz, CEO of StagedHomes.com.

Curb appeal is equally important. Says Long Island, N.Y., agent Diane Saatchi of the Corcoran Group: "The trip from the driveway to the front door can kill a deal." So slap a fresh coat of paint on the door, hang a wreath, hide the garbage cans, and plant flowers along the walkway.

Hire an agent

You may hate the idea of parting with 6% of your home's value, especially when you're facing the prospect of getting less than you dreamed of. And with the Internet making do-it-yourself sales easier than ever, you may be tempted to dispense with an agent. But in a tougher environment, marketing is everything, and an experienced agent--that is, one who didn't recently jump into the real estate gold rush--can be invaluable in helping you price your home correctly and in getting it noticed by prospective buyers. An agent can also steer you through the tortuous sales process and keep a deal on track when the inevitable glitches crop up.

So are there ways to save on those steep commissions? Any real estate professional will tell you that fees are always negotiable. But just as investors with hefty portfolios often pay smaller percentage fees to their advisors, sellers of high-end homes have the most leverage when it comes to commissions. Paul Butler, a Windermere broker in the Puget Sound area, recently reduced the take on a $900,000 property to 4%. You may also be able to get a package deal if you use your listing broker to buy another house in the same market.

If you're a buyer ...

Don't let the asking price be your guide

Many sellers are clinging to bloated pricetags that are based on what homes were fetching at the peak rather than what's realistic today. Case in point: A four-bedroom home in Wellesley, Mass., that debuted on the market last summer for $750,000 now has an asking price of $620,000.

To gauge local conditions, you want to know how many houses are for sale and how long the average house has been sitting on the market today vs. a year ago. Once you focus on a particular house, get the same report on comparable dwellings that an agent would give a seller. It costs you nothing, and it can save you from placing more money on the table than you should. Without doing this research "you're just shooting in the dark," says Martin. "The home could be totally overpriced, or it could be a steal."

Take your time

In the heat of the boom, home shoppers committed to properties within minutes of touring them. Although sellers still have the upper hand in some markets, in most, time is on your side. You can make good use of it by getting to know your target market intimately. "Now you can do your homework," says Lance Pagel, a Re/Max agent in Roseville, Calif.

Some of the things you can use the extra time to delve into more deeply: the school system; zoning issues that could change the value of homes in the coming years; the job picture; and recent property tax increases, as well as the outlook for more.

Once you're ready to make an offer, again, don't be hasty. Hire a professional to conduct a careful inspection, and follow up by getting estimates for dealing with any problems he uncovers--repairing a leaky roof or replacing an old furnace. All this is part of the cost of carrying a house, and you need to factor it into your budget before you know what you can really afford to pay.

Ask for goodies

Sellers who won't budge on the asking price may be willing to make other concessions. This is especially true when you're buying from homebuilding companies, which need to keep prices stable to avoid angering recent purchasers. To move product these days, they're throwing in all sorts of upgrades. In January the National Association of Home Builders found that 41% of builders were offering freebies, up from 32% six months earlier. Near Sacramento, Centex is offering backyard landscaping, window treatments, and free washers and dryers to first-time buyers of 1,700- to 2,800-square-foot homes. A Fairfax, Va., builder of condos is tossing in a prepaid two-year lease on a BMW to buyers of two- or three-bedroom units. And in San Diego, in a program offered by mortgage lender Cal Pacific, some sellers are promising to make up to a year's worth of mortgage payments to buyers who come close to the full asking price. Still, with plenty of houses to choose from, don't let a gimmicky offer lead you to overpay for a place you're not crazy about.

If you're a speculator ...

Get out, now!

In 2005, investors accounted for 28% of the housing market, up from 23% in 2004, according to the National Association of Realtors. But the game of buying a home--or two or three or 17--holding it for a bit, and then flipping it for a handsome profit has pretty much played itself out. "Get out as fast as possible," says Mark Zandi, chief economist with Moody's Economy.com. "The market is moving away from the investor, and even when it stabilizes, I don't think it's going to come back anytime soon."

So don't repeat the mistake that tech investors made during the dot-com bubble. As stocks spiraled downward, they held on, thinking that the market would bounce back quickly. Just accept that you're going to lose money on that Miami deal. "Take your lumps," says Jon Duncan, a Tacoma financial planner. "If you're feeding this thing cash flow, it won't take long to make this a very bad investment."

If you're staying put ...

Keep an eye on your mortgage

If you hold an adjustable-rate mortgage, you may be in for a shock. Interest rates have been climbing sharply, which means your monthly payment could jump by several hundred dollars at the next adjustment. Study the terms of your ARM--they vary widely. If you'll soon face a big hike, this may be a good time to switch to a fixed-rate loan. As for recent hints that the Federal Reserve may be ready to end its string of rate hikes, don't expect mortgage rates to start drifting downward anytime soon. The economy looks strong, and oil is putting upward pressure on prices. "The inflation monster is on the horizon, and it keeps looking over the hill," says UCLA economist Ed Leamer. "If it jumps up and causes problems, there will be elevated interest rates."

Don't bank on your house to fund your retirement

If you've your home for five years or more, you may be sitting on a substantial gain. But don't use that as an excuse to ease up on retirement savings. For one thing, future appreciation is likely to be much more modest. Historically, residential real estate has outpaced inflation by a little more than a percentage point each year--hardly enough to pay for two decades of sunset years on sun-filled links. So max out on your retirement contributions and consider any future real estate profits an extra cushion.

Keep your cool

If you're in the real estate game for the long haul, you're going to be fine. Your home, after all, is really a place to rest your head. So look past any current softness in the market. "If you can wait it out, the cycle will come back again," says Leamer. "But while you're waiting, don't read the real estate section of the newspaper." Top of page