Prices and current mortgage rates are very low right now, and it may seem like the perfect time to buy a home, but things are not as good as they seem in the real estate world. Inventories of homes for sale are extremely low and home builders are just starting to recover from the recession. Homes listed for sale receive a lot of offers, which makes it very stressful for all home buyers.
Trying to buy a home in a seller’s market is a frustrating process that will usually result in you not being able to buy the first home that you want. When demand for homes exceeds supply, sellers will receive multiple offers on their homes, which will make the home prices go up. With a little research and preparation, your chances of succeeding in a sellers’ market will be greatly improved. Here are 10 tips that will turn the odds in your favor:
Tips for Home Buyers
1. Find a Good Real Estate Agent. In a sellers’ market, sellers receive multiple offers on their home, so things tend to move faster than usual. You will need to be quick and have knowledge of the whole process. A very good real estate agent will greatly increase the chances of you getting the home that you are looking for. He or she has to know the area, have good relationships with many other real estate agents, and give you the best advice when it comes to making an offer on a home.
2. Know the Process. Do some research on the whole home buying process. From knowing what to look at when considering a house or apartment, to knowing the steps involved in buying a home, this process can be overwhelming. You must also be aware of what you are looking for and what the home prices are in your area. Having a good real estate agent is enough for most people, but knowing a few things about what buying a home involves can help you act quickly when needed, and avoid a lot of headaches.
3. Get Pre-Approved with a Good Lender. Getting pre-approved for mortgage loans will involve some running around in order to get the paperwork ready, but it is an important step in buying a home, as most sellers will not even consider your offer otherwise. Preparing all the paperwork before even starting looking at houses is always a great idea which will save you a lot of time, and give you the advantage of acting quicker when you find a home.
4. Act Quickly. After finding a home that you like, don’t wait too long before making an offer. The more you wait, the bigger the chances are that more people will become interested in that home, and your competition will increase to a point where someone else will make a more attractive offer.
5. Pay the Closing Costs. Because it’s a sellers’ market, the seller will most likely have a bunch of offers for his or her home. Asking the seller for closing costs credit will put you at a disadvantage, as there might be other buyers who didn’t ask for credit. For example, if the sales price of a house is $450,000 and you need a $15,000 credit for closing costs means that the seller will only get $435,000 for the house. Even offering him $465,000 and asking for closing costs credit will put you at a disadvantage, because the seller will have to pay more in commission, tax and title fees.
6. Expect to Pay Market Value. Adjust your offer according to sales prices in the area that you are interested in. If your initial bid is too low, you may ruin any chance of getting that house. In a sellers’ market prices usually keep going up and you need to adapt before making an offer.
7. Good Faith Deposit. While a good faith deposit, or an earnest money deposit, doesn’t normally have a set requirement, sellers in a sellers’ market expect buyers to show a little more “good faith.” Normally, good faith deposits are between 1 and 3 percent of the sales price.
8. Be Flexible. If you can offer a larger down payment or if you can move in any time after you buy the home, then make sure you mention it. Also, if you plan on fixing and improving things in your new home, then it’s generally best not to be too picky after you inspect the house or apartment.
9. Write a Personal Note to the Seller. A personal letter that includes a little about yourself and why you like the seller’s home can make you stand out from other interested parties, or it can make a big difference if the seller has another offer similar to yours.
10. Don’t Give Up. In a sellers’ market, the chances that some of your offers will be rejected are very big. Try not to take it personally and, more importantly, don’t give up. While it is disappointing, keep in mind that the seller is only making choices based on what is best for him or her.
Buying a home in a sellers’ market, when prices are high and your offers keep getting rejected, can prove to be a challenge, but doing a little research on the subject can go a long way and save you a lot of trouble.