5 Tips to Help You Buy a Home in a Competitive Market
The 2019 housing market is going to be challenging. Follow these tips to be closer to owning the home of your dreams
It’s a seller’s market these days. Homes are selling on average within three weeks – only taking a day to go off the market in some parts of the U.S. Buyers have little time to locate, bid and win the home of their choosing. Factors such as walkability, proximity to employment centers and desirability of school district are just some of the things driving up home prices.
Meanwhile, the reality of high rents across the country and the prospect of higher mortgage rates is convincing many people to take the homeownership leap now. But by being a little flexible when assessing these attributes, buyers can press through the competition and find and buy a home that they’ll love.
Here are five things you can do to make yourself a strong competitor in a tight home buying market.
- Find a REALTOR who “gets it”. This market is NOT for the hobbiest REALTOR® I know you might really LOVE your long time friend or family member, you might feel you owe a friend because he/she helped you build your deck or paint your house. Those are NOT reasons to hire someone for the biggest purchase in your life to date. You need someone who is available to show you homes as soon as they hit the market, someone who is as vested in selling you a home as preventing you from buying the wrong home, someone who is pulling comps and well versed in writing a strong contract and THEN you need to listen to that person when they give you advise. I promise you when you hire the right REALTOR® they WILL get you in the right house!
- Get pre-approved NOW. While it should go without saying in today’s market, many homebuyers still begin visiting homes without a mortgage approval letter from their lender. Know the difference between pre-qualification and pre-approval. A pre-approval means that a lender has actually examined your credit and other expenses helped you determine how much mortgage you could afford given their underwriting guidelines. Understanding your buying power completely, can help you make split second decisions in this fast moving market, so get pre-approved NOW and discuss not just one price point but a range that fits your needs. **BONUS LENDING TIP -Use a local lender. Your choice of lender could kill the entire deal. You might think “Rocket Mortgage” is the end all beat all of lending but savvy sellers and their agents are looking to see who the lender is. If that lender is an unknown, they might ask for more info, if the lender had a reputation of missed closing dates they might select a buyer with a lender that has a better reputation.
- Avoid the contingency contract. Just about every real estate agent will tell you that contingencies in a buyer’s offer will quickly move that offer to the bottom of the pile. Contingencies, such as having to sell your home before closing on the other one, will certainly turn off sellers. Remember, there is very little inventory on the market today on a national scale. Every market is different, but a firm, clean offer even in a less competitive market tells the seller you’re serious and more likely to finish the deal on time. Typically a seller expects there to be an inspection and financing contingency but often might consider a slightly lower price if the offer was a cash or as-is offer.
- Make a strong net-price offer. The best of the best homes today are often sold with multiple offers in the first week of hitting the market. In this scenario there is RARELY a counter offer, so you only have one shot to make your contract stand out. A Seller will be looking at the bottom line net to them so think through the numbers. $300,000 List price, $5000.00 in pre-paids and closing costs to buyer, $500.00 home warranty to buyer this would equal a net price to the seller of $294,500.00. If you want the seller to get a net of his listing price and still get all those things you will need to offer him $305,500.00.
- Gather your best down payment. Present an offer with the highest down payment that you could reasonably manage. Average down payments were on the rise in 2018, sellers are more likely to accept an offer from a buyer with a larger down payment for a variety of reasons, including the belief that a buyer with a larger down payment is going to more smoothly qualify for a mortgage. a 20% down payment says to the seller that this buyer has the funds needed to close successfully. Where a buyer putting the minimum amount down might leave the seller fearful that a small uptick in costs could send the closing on a collision course.
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