One of the most common complaints I hear in todays market are buyers feeling frustrated at their multiple offers being rejected or beat out by cash buyers and investors. While there is no absolute solution, the best advice I can give is to be PREPARED.
Today’s market is what is referred to as a “seller’s market”. When the number of homes for sale is insufficient to cover the number of buyers in the market, this creates a greater demand in housing, which tends to increase prices and desperate buyers are willing to go higher and higher and meet the sellers terms which greatly benefits the seller, thus the term “seller’s market”.
In a seller’s market, serious buyers need to be prepared to “pull the trigger” when they find their ideal home. I can offer a few tips that may make this process a little smoother.
There is nothing more depressing than finding your dream home only to find out you cannot qualify or to find out that you are shopping at Nordstom on a K-Mart budget.
Tip #1: The most important thing a buyer can do before beginning the home search is to contact a reputable lender and determine two things; one, their credit worthiness and two; the amount for which they qualify. The lender can also calculate the monthly payment including property taxes and insurance should you opt to have an impound account. It is important to be REALISTIC about your budget and be sure to shop within a price range that you will be comfortable with for the long haul. One of two things will happen at this point. The lender will provide you with a “loan pre-approval” letter OR he will explain to you what actions you need to take to be able to qualify in the future.
Tip # 2: If you are fortunate enough to receive a pre-approval letter, contact a Realtor and set up an appointment. You want to be clear and detailed as to your requirements for a home so that your Realtor will not waste your time showing homes that miss the mark. Make a list of your MUST haves (# of bedrooms, bathrooms, location, etc…) and a list of your NICE to haves (pool, spa, etc…) It is also important to be clear about what you do NOT want. Once this meeting of the minds has occurred, your Realtor will get to work. He/she will check the Realtor MLS sites daily for properties that match your specifications. If you are a tech savvy buyer, your agent can set you up for automatic email notification for properties that meet your search criteria. Any properties that are new to the market, placed back on the market after a failed escrow or properties with a recent price reduction can automatically be sent to your email address. You should also ask your Realtor if they have a website you may use for your own search. Sites such as Zillow, Trulia and Homes.com, while popular, have a lag time in updating information so it is common to find a property that says “active” when it is actually pending or sold. Something as simple as this can cause a delay in action and missing out on your dream home.
Tip # 3: Another important factor to remember is to BE AVAILABLE to view properties you are interested in promptly. It is very common to see upwards of 15-20 showings on a new listing in just the first day on the market with numerous offers within the first several days on market. It is essential to act quickly if you want to have an opportunity to have your offer considered.
Tip # 4: While it is important not to leave any cash on the table, unless you are shopping for serious fixer uppers, this is not the market in which the low ball offer strategy of the past will be successful. In a market where multiple offers are the norm, you will want to structure your offer to be attractive in both price and terms so that the seller will consider it worth his time to accept or remain in negotiations with you with a counter offer rather than reject the offer straight away. Your Realtor can advise you on how this is done and will complete a comparative market analysis on the property to determine if the list price is actually reasonable compared to similar properties in the area. It is not uncommon to write several offers before having one accepted so hold tight and keep going. You will find the house that is meant to be your home.
My best advice during this process is no matter how long it takes, please be vigilant in maintaining your credit worthiness. There is nothing worse than finding “the” house, getting your offer accepted and then to lose your loan because you accidentally made one late payment. It can and does happen! I have a great handout available on how to improve your credit score and things to avoid once under contract that I am happy to share. If you would like a copy, please send me your email address or mailing address to firstname.lastname@example.org.
I am happy to hear your thoughts and answer any questions you may have on this or other real estate related issues. I look forward to your comments.