Make rocky real estate market work for you

NEW YORK (CNNMoney.com) -- Home prices continue their fall, now averaging $223,800, down 1.5 percent from a year ago. Sluggish home sales and rising delinquencies are a very real problem in many markets.

The news isn't good, particularly for sellers, but we'll give you the tools to navigate this mess whether you're trying to buy or sell a home.

If you don't have to sell now, don't. But if you're convinced you want to sell, there are some steps you need to take. Pricing your home is one of the most important moves you can make. Your home needs to stand out from all the other properties on the market. And competitive pricing is the best way to draw potential buyers.

To get a sense of what similar homes are going for in the area, ask a real estate agent for comparables or go online to your local realtors association to get reports on local home prices. Sellers may also have more wiggle room with real estate agents when it comes to fees and commissions. (See home prices in 149 markets.)

Next step is to increase curb appeal. Mow the lawn, and kill mold and mildew on the house, sidewalks, or driveway. A fresh paint job can work wonders.

Inside, get rid of clutter and take down those family photos from the wall. Your goal is to have the potential buyer see your space as their potential home.

At night, you may want to leave some lights on, creating a sense of warmth for buyers doing an evening drive-by.

There's no debate here: it really is a buyer's market. But there are some strategies you can use. Sometimes paying for moving costs or throwing in some appliances is the difference in getting your house sold.

You may also opt to pay for closing costs which can run about $2,000. If you're really desperate to sell, you may want to pay part of the buyer's down payment - that's generally the biggest hurdle for first-time homebuyers. Remember, this is an expensive proposition.

Now, if you're looking to buy in this market, you may find that you're having a harder time finding credit. That's because banks have tightened up lending standards. So, even though you may have a good credit score, you may not get the rate you were looking for.

But make sure you shop around. There are big differences in rates depending on what kind of lender you go to. Make sure you get at least three to four quotes before you settle with a lender. If you belong to a credit union, you may want to check into that option - sometimes their rates can be more competitive.

Long gone are the days of no doc mortgages. Lenders are double-checking appraisals and asking for the most up-to-date bank statements. So, not only will you need to improve your credit score, you'll likely have to pony up even more cash for the down payment.

Even with good credit, most borrowers will have a hard time borrowing 100 percent of the purchase price today. You may even need to put down as much as 20 percent.

In the short term, the housing market likely won't get much better.

The country's biggest mortgage lender - Countrywide Financial - announced it will tap into an $11.5 billion dollar line of credit to weather the housing environment. Plus housing starts and permits both fell today to the lowest levels in more than a decade.

But there is some positive sentiment out there. The National Association of Realtors predicts home prices will turn slightly positive again by spring of 2008 and rise about 2 percent that year.

And of course all eyes will be on the Fed. Some analysts are looking for a rate cut and that could breathe some life into this market.