TIPS FOR BUYERS

Falling prices are positive

As house prices have soared, more and more first-time buyers have been priced out of the market. A slowdown could change all that as more homes fall within the range of would-be homeowners.

A downturn is also good news for people who already own a property and would like to move to a bigger home or more expensive area. Trading up gets easier in a downturn because the gap between the cost of smaller and bigger properties narrows. Say your flat is on the market for ??250,000 and you are trading up to a ??400,000 house. Prices in your area fall 10 per cent meaning you take a ??25,000 hit on your flat but the price of the house drops by ??40,000 to ??360,000. That's a net gain of ??15,000.

Don't count on big discounts

If you're holding off buying, hoping that prices will plummet, prepare to be disappointed in London and the south east as property experts believe prices will remain resilient. There is so much demand for housing, especially in the capital, that prices are unlikely to fall far. Analysts also expect prices in Scotland to hold up as well.

However, it doesn't hurt to haggle. There is so much bad news around that sellers are feeling nervous ' experts say that you could easily knock 10 per cent or more off the asking price.

Rent to lock in profits

If you're convinced the market in your area is going to fall further be prepared to move into rented accommodation and wait for the market to drop before buying back in. House prices need to fall by about 4 per cent to make it financially worthwhile to sell to rent, according to property analyst Knight Frank.

Do your homework

Find out how much similar properties have sold for by typing the postcode into the website Hometrack.co.uk or Upmystreet.com. But remember that these are backward looking: they tell you what homes sold for in the past not what they are selling for now. Propertyforecasts.co.uk, which estimates future price movements for the next five years, is also worth a look, although it costs ??15 for a full report.

Get your finances in order

As sentiment has soured, fewer vendors are putting their properties on to the market so you must be ready to pounce when your dream home comes along. Talk to a mortgage broker when you start looking to find out how much you can borrow and what the best deals are. You improve your chances of having access to the best deals if you have a deposit of 20 per cent or more, don't need to borrow a high income multiple and have a spotless credit record. Several brokers such as L&C (www.lcplc.co.uk) and Charcol (www.charcol.co.uk) have useful calculators which estimate how much you will be able to borrow.

AND FOR SELLERS...

Price realistically

Putting your home on the market at the right price is key if you want to guarantee a quick sale. Get several valuations from estate agents and also take a look at the websites mentioned above ' then set the price somewhere in the middle. As a rule of thumb, estate agents suggest you should ask for about 5 per cent more than you realistically expect to get. However, if you really need to sell fast, set an asking price slightly lower than your ideal from the off ' it looks better than desperately slashing the price at a later date.

Flexibility pays

You'll make yourself more attractive to potential buyers if you can move out fast ' it also gives them less chance to back out of the deal. Consider moving into rented accommodation if you are offered a good price but have nowhere to move to.

Don't move, extend

If you're moving because you need extra space, extending your existing home could be cheaper and less hassle. However, you need to make the right improvements at the right price. A loft conversion is the single most valuable alteration you can make to your home, according to a study by Nationwide. By adding 300 square feet of floor space made up of an extra bedroom and bathroom you can add over 20 per cent to the value of your property. Turn a two-bedroom house into a three-bed and you can increase its value by 12 per cent. But can you bear the builders and the mess?

Don't be afraid to pull out

Just because you've hoisted a 'For Sale' sign doesn't mean that you can't change your mind if you're not seeing the interest you hoped. Ignore the hard sell from your estate agent. They'll probably try to convince you that there are lots of interested buyers waiting in the wings ' the chances are it's the first time you've heard their voice in weeks.

If you don't need to sell, stay calm

It's a statement of the obvious but one that, in property obsessed Britain, we often forget: if you're already on the ladder and not planning to sell in the near future it doesn't matter if house prices drop. The chances are that by the time you need to sell prices will be back up again. Even if they're not think of all those juicy gains you've made over recent years 'house prices are up an average 59 per cent over the past five years, according to Halifax. A house that was worth ??120,000 at the end of 2002 was worth nearly ??200,000 in December. Think about all that 'free' money and stop worrying.

For the latest on house prices and a guide on how to survive the mortgage drought, visit Times Money's Property & Mortgage section.

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