It’s no secret that the real estate market is hot right now. Home prices are rising, inventory is low, and competition is fierce.
If you’re thinking of purchasing a home in today’s market, it’s more important than ever to be prepared.
With the right planning and approach, you can still get the home of your dreams. So, here’s how to buy a home in today’s market from someone actually working in the industry.
Get Pre-approved for a Loan Before You Start Your Search
In today’s competitive market, being pre-approved for a mortgage is a must if you want to get your offer considered.
A lot of agents are requiring a pre-approval letter to be attached to all offers.
If you find a house you love and don’t have a pre-approval letter, the house could be gone by the time you get one.
A pre-approval ensures the seller that the buyer is qualified to buy the house.
To get pre-approved, you’ll need to provide your lender with financial documentation including tax returns, pay stubs, W-2 forms, and bank statements.
The lender will then review your information and give you a letter stating how much they are willing to lend you.
This letter will give the seller confidence that your mortgage will get approved if they decide to accept your offer.
With this increase of cash buyers, this pre-approval letter is a must to be able to buy a house in a hot market.
Work With an Experienced Buyer’s Agent
The process of buying a home can be complicated and stressful, especially in today’s market.
It’s important to have an experienced professional on your side to help guide you through the process.
A buyer’s agent will help you find homes that meet your search criteria, negotiate on your behalf, and provide expert advice throughout the process.
Best of all, it doesn’t cost you anything to use one. They may even help you find homeowners that are using alternative ways to sell houses.
When interviewing agents, be sure to ask about their experience with buyers in today’s market.
Trend on the Rise
Look for houses under budget so you can afford to offer more than the asking price and then use these cheap ways to increase home sale price. In this hot seller’s market, many homes are selling above ask. By looking for houses under your budget you can be in a better position to offer more than the listing price and have a better chance of your offer being accepted.
You’ll want an agent who knows how to navigate the multiple offers and bidding wars that are common in many markets.
You should also ask about the agent’s communication style and whether they will be available when you need them.
It’s important to find an agent you feel comfortable working with and who you can trust to have your best interests at heart.
What Does a Buyer’s Agent Do:
- Find homes for sale that meet your criteria – Once you’ve determined what you’re looking for in a home, your agent will help you find properties that match your criteria. They will set up showings and provide information.
- Know the area inside and out – A good buyer’s agent will know the area you’re looking in like the back of their hand. They should be able to provide insights of neighborhoods, schools, and local amenities.
- Negotiate on your behalf – Once you’ve found a home you want to make an offer on, your agent will help you craft a competitive offer and represent you in negotiations with the seller.
- Refer you to other professionals – Your agent should have a network of trusted professionals they can refer you to, such as mortgage brokers, home inspectors, real estate attorneys and more.
- Be your advocate – Your agent should be your biggest advocate throughout the entire buying process. They will help you navigate the challenges of today’s market and be there every step of the way.
Be Prepared to Act Quickly
When you find a home that you love, it’s important to be prepared to act quickly. In today’s market, homes are selling fast, and it may only be on the market for a few days.
If a house comes on the market that you might like it is highly advisable to tour the home the first day if possible.
You will also need to be ready to make a fast decision. If you find a home you like, be prepared to submit an offer that same day that you viewed the home.
Lots of sellers are losing some money selling a house as-is, but in today’s market they are still selling fast regardless.
Tactic for Success
Use an appraisal gap. In today’s seller’s market houses are appraising for less than they are selling for, which can cause a mortgage to fall through. An appraisal gap is when the buyer agrees to pay the difference between the appraised value of the home and the selling price up to a certain amount so that closing will go through.
Submit Your Best Offer First
In today’s competitive real estate market, it’s important to make sure your offer stands out from the rest. One way to do this is to submit your best offer first.
This shows the seller that you’re serious about the property and that you’re willing to pay what it’s worth.
Tactic for Success
Use an escalation clause. An escalation clause is a provision that allows you to increase your offer price if the seller receives a higher bid from another party. This can help if you don’t want to put your highest offer first. Just be sure to choose an escalation amount that won’t break your budget.
Additionally, with so many buyers submitting offers, sellers may not counter offers that are lower than what they’re expecting.
By submitting your best offer first, you’ll have a better chance of having your offer accepted.
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Write a letter to the seller expressing why you want to buy their home. An agent isn’t required to show their seller the letter, but they might. Some sellers have an attachment to their home and want to see it loved. They would rather sell to someone who is going to appreciate it, as opposed to the best offer on paper.
Be Flexible With Your Move-In Date
If you’re looking to buy a home in today’s hot housing market, being flexible with your move-in date can be a huge advantage.
Some sellers may want to close quickly, while others may want to sell their home and rent it back until they find their next house.
Either way, being flexible with your move-in date can give you an advantage against other offers that aren’t as flexible.
If you’re able to work with the seller’s timeframe, make sure that this is included in your offer.
Don’t Get Discouraged
It’s easy to get discouraged when you’re trying to buy a home in today’s market. There are multiple offers on most homes and bidding wars have become the norm.
But don’t give up! There are still homes out there that are within your budget.
Work with your agent to find homes that meet your criteria and be prepared to act quickly when you find one you like.
With a little patience and perseverance, you’ll be able to find the home of your dreams.
Ways to Make Your Offer Stand Out:
- Offer over asking price – In a seller’s market, offering over the asking price is often the norm. Offering more than the asking price will make the seller more likely to accept your offer.
- Bump up the earnest money deposit – A higher earnest money deposit is another way to show that you are serious about buying the property.
- Let sellers keep a portion of earnest money if the deal falls through – Letting the seller keep some of the escrow money if the contract falls through will show that you are serious about buying the house and stand out from other offers.
- Shorten the contingency period – A shorter loan or inspection contingency period will show that you are not expecting any problems with financing and are willing to move fast.
- Offer to let sellers stay for a month after closing for free – Your first mortgage payment isn’t due till a month after closing. Having the sellers not have to rush to move out could reduce their stress and make your offer ideal.
- Have your lender pre-underwrite your loan – Having your loan pre-underwritten is stronger than having a pre-approval. This will show the seller you have been thoroughly vetted and that you have the highest chance of closing.
- Offer to pay some or all of the seller’s closing costs – If you have the means and the house is important to you, this could be an option to make your offer irresistible.
Buying a home in today’s market can be challenging, but it’s not impossible.
With a little knowledge and preparation, you can find a great home that fits your budget.