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 buyer ...

 

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."

 

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.

 

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 ...

 

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 ...

 

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."

 

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.