The process of buying a new home and establishing strong roots should be one of the most exciting stages in life. Lately it’s more like going to war.
With demand strong and supply extremely weak, buyers at many US metros have become accustomed to fierce bidding wars where it seems like you have to give up your right kidney to actually win.
Are future homeowners destined to fall into a cycle of lost offers and feelings of discouragement? Hopefully not. Here are some expert tips to help you stay positive and get the upper hand.
1. Adjust your expectations
These are crazy times for the housing market, no doubt. At national scale, median time on market for properties is close to historic lows. In many places, bidders offer thousands of dollars above the listing price just to stand a chance.
So going into the process based on your idea of a good deal two years ago – or even two months ago – won’t work. “You have to be realistic about the market conditions where you are going to buy,” says a Boston-area real estate agent Dana Bull. Preparing for disappointment is never a winning tactic.
2. Trust your agent
Ultimately, the buyer is in the driver’s seat when it comes to making offers and obtaining financing. But people who have bought or sold in previous markets sometimes think they know the prices better, even if their benchmark is terribly outdated.
During a fierce real estate market, it’s all the more important to trust the advice of a professional who is immersed in the industry and knows what it takes to win deals, notes a New York realtor . Gerard Splendor. “The ability to communicate and develop a good working relationship with the agent representing them is absolutely crucial, especially in today’s fiercely competitive environment,” he says.
3. Don’t have too many cooks in the kitchen
When making one of the most important financial decisions of your life, it’s natural to seek advice from a network of family and friends. But involving too many people in your search can lead to many conflicting entries.
Bull says you can create a small circle of loved ones to help you through the process, but they need to be fully invested. “Just make sure they’re involved from the start so they understand the tough decisions you need to make and can support you in those decisions,” she says.
4. Do your research in person
Home shopping in the digital age offers many benefits, including the ability to scroll through a series of photos and target the homes you like. But pictures alone don’t tell you the whole story of a property – how the rooms fit together, what the neighborhood is like, etc.
This is why you really need to get out there and see as many houses as possible. “Every property you look at is a valuable case study,” says Bull. The more you look, the better your idea of what a bargain looks like.
But that doesn’t mean using a shotgun approach either. Buyers should ideally make a list of their “must-have” features in order to focus their time and energy on properties that are real contenders, advises Dorothee Schrager, a broker in New York. “Don’t waste time trying to see all the properties on the market because when you see the right place, you’re going to be distracted,” she says.
5. See ads as soon as possible
With many sellers accepting offers in less than a week, Bull says it’s incumbent on seekers to come in and view a home as soon as they can – ideally that’s the weekend it’s put on sale for the first time. “Sometimes these offers don’t even go through to the deadline,” she says. “I want customers to at least have the opportunity to compete.”
Also, the sooner you get in, the sooner your agent can do their due diligence. This could include a whole list of things – researching nearby land zoning, talking to neighbors about the pros and cons of the area, and researching any permits the previous owner has obtained. The more information you have about the home before making an offer, the more confident you will be.
6. Ask what risks you are willing to take
Sellers are in an enviable position these days, often having the luxury of choosing from multiple offers above their listing price. They usually try to minimize the chances of an offer failing, which means they may not take you seriously unless you waive protections such as home inspection and contingencies. Evaluation.
Obviously, this creates some risk, so you have to know where the red line is. By forgoing a pre-home inspection, for example, you could be exposing yourself to costly repairs that weren’t obvious during the visit.
And if you forego the appraisal contingency, there is always the possibility that the appraisal will be lower than your offer, forcing you to make up the difference in cash. This can happen more frequently when prices tend to rise because professional appraisers look at past home sales when making their calculations. “It’s not that the property isn’t worth it,” says Bull. “It’s that the data is lagging.”
7. Prepare your financing
“The buyer in a hot market has to be ready to act quickly, and that means having all your ducks in a row,” says Schrager. A big part of the preparation is talking to lenders and having a commitment letter that you can show the seller’s broker.
In the past, being able to get pre-approved put you on a pretty solid footing. But these days you’re even better off, your loan is pre-underwritten, which means it’s further along in the process. “This minimizes the risk of surprises,” says Bull. And your loan can usually be closed faster, to boot.
8. Know that good deals still exist
When every home you look at receives a number of great offers, it can seem inevitable to go well beyond your budget. However, Bull says finding good value isn’t a pipe dream even now.
Sometimes the seller’s broker may not be particularly responsive, so they don’t get the offers they would otherwise. Or the property may have a dated look that an imaginative buyer can turn into a gem. This is often when you can get a much better price.
“Most people want everything presented in an exciting way,” says Bull. “If you can train yourself to look past the smoke and mirrors of great marketing, you can still get a great house.”