By now, it’s no secret that the current housing market is heavily favoring sellers right now. With the low inventory and high buyers competition, homes are flying off the market as quickly as they are coming on. In addition, many homes are selling for over the list price due to the amount of buyer competition. However, as a buyer, don’t despair or fear the competition. You just need to be better prepared to handle the adversity on your journey to landing your home. If you choose to sit it out and wait, prices and competition could come down, but at the same time interest rates could increase which would reduce your buying power significantly. Whether you’re ready to jump in this market or hesitant and planning to wait a bit, read the steps below to help you become a prepared buyer that is ready to do battle to win your home.
Step 1. Find a local real estate agent that you know, like, and trust. They should be knowledgeable about the local areas you’re interested in, as well as have a pulse on the market. They should know what homes are selling for compared to the list price, the avg days on market for a home, and what type of offers have been winning lately. In addition does their style of work, communication, and availability fit with yours? Are they creative, good at negotiating, and have a good network of professionals to refer you to if needed? If they are not available when you need them, don’t reply in a timely manner, or give you attention it likely will not result in a successful relationship.
Step 2. If you are not pre-approved already, ask your agent for referrals to their preferred lenders list and get your loan application started to get pre-approved. Getting pre-approved ensures that your finances are in good standing to secure a loan and sets your maximum budget for your home purchase. Most importantly, without a pre-approval letter to accompany your offer to purchase, the chances of getting your offer accepted are next to zero. Choosing to wait until you find the one, will only cause you to miss out on that opportunity as a pre-approval could take a few days or weeks depending on how quickly you get all your information to the lender. For more details on selecting a lender, check out my previous blog post about lenders.
Step 3. Have your agent set up an automatic search subscription to notify you as soon as possible whenever a home that meets your search criteria is listed on the market. Your search criteria should include home features that are must haves, nice to haves, and absolutely hate features. If the available inventory is low based on your criteria, then you must be willing to tweak it as needed that may mean increasing your budget, being open to other locations, or compromising on some of your must haves.
Step 4. Be quick to book that showing! As soon as a home that meets your criteria is listed you may only have 1-3 days to see the home. In this market, typically new listings are going up towards the end of the week Thursdays or Fridays. Then showings open Friday and Saturday, with Sunday usually being dedicated to reviewing offers and selecting the winning offer. Scheduling showings can be a challenge especially with covid, some sellers are not allowing overlapping showings to minimize the number of people in the home and for social distancing. In addition, some showings are limited to only 15 minutes! So once the showing schedule fills up, that’s it! So it is extremely important to contact your agent early to get you on that showing schedule.
While you wait for your showing appointment, you should drive by the home, make sure the neighborhood and exterior features of the home are what you want. This will save time for you and your agent and will ensure that you are only looking at homes that you are absolutely interested in. During the showing, as you walkthrough take note of the features that meet your criteria, envision yourself living in the home and how you would use each room. In today’s market, you have to be able to decide if you intend to submit an offer or not by the end of the showing. If you stall and sleep on it, it likely could be gone the next day which could result in lingering regrets for days. So it is very important to actively evaluate the home as you’re walking through and provide feedback to your agent so that they can help find the right home for you.
Step 5. Submitting an offer. Once you’ve decided that you intend to submit an offer. The first thing to do is determine a purchase price for your offer. Ask your agent for comps on the home to help determine if the home is priced low, middle, or high. From there, evaluate what other similar recent homes have been selling for over their listed price. Review the data and come up with a purchase price that you are comfortable with as well as believe is a strong offer to get the home. The next step is to go through the terms of the offer and write the cleanest and most aggressive offer you can. This includes items such as earnest money amount, closing date, inspection, appraisal, and finance contingencies. In this market, the less painful you make it for sellers, the better chances your offer will be accepted. So go over each item in detail with your agent and decide what your comfort level is.
Step 6. Once your offer is accepted, the first item of order would be to send the earnest money per the listing agent’s instructions which your agent will provide to you. Then you’ll go through the due diligence period which may include home inspections and an appraisal if they were a part of your offer. Once the appraisal is completed, your loan will go into final underwriting for approval to close on your home. It is very important that during your home buying search, you don’t open up any new credit cards, finance large purchases – appliances, furniture, or a new car. Any major changes to your finances could cause your loan not to close.
Step 7. If all is well and you’ve received the clear to close from your lender. Congratulations, on your new home! You’ve done it!