The real estate market is constantly changing, and it can be tricky trying to navigate the shifts. In a seller’s market, which is today’s current state, more people are buying houses than are selling them. Prices tend to be higher, which increases the need to make a quick decision about purchasing a home. As a home buyer, it is crucial to make sure you have the knowledge and the tools to acquire your forever home. Luckily, we’ve compiled some strategies to help you navigate the market as buyers in a seller’s market.
Preparation is Key
There are a few elements that need to be taken care of prior to purchasing a home. Before anything else, figure out your ideal price point. Analyze your finances and figure out the max amount that you can spend. If your budget seems low, start saving up now. Not only will you have the listing price to pay, but also closing costs and moving expenses.
When establishing your budget, you should know how much income you’re receiving and what your current monthly expenses are. Also, keep in mind future expenses such as property taxes, insurance, and even maintenance. Buying a home is a significant financial decision, so only move forward when you are ready. The earlier you start this process, the less stressful it will be.
Start Looking Early
The earlier you start looking for homes, the better your options will be. If you are looking to move into a popular neighborhood, those are usually the areas with few listings. Keep an eye open on areas you want to move into and do some preliminary research on factors such as property reports, any information on the location, and any upcoming deadlines.
Also, determine the type of house and neighborhood that you prefer. How many bedrooms do you need? What kind of housing style are you looking for? Once you’ve started answering some of those essential questions, start seeking out a credible real estate agent to help you find a home that matches your preferences. If you have no idea what you are looking for, neither will your realtor. Start hunting for homes early, and plan your move accordingly.
Have An Experienced Realtor
It is crucial to choose a real estate agent who has shown that they have expertise in the neighborhood that you are interested in. Also, make sure that they are responsive in communicating with you. An experienced agent typically has connections with other realtors as well, which means they have personal insight on properties. When finding a realtor, you can either get agent referrals from other local home buyers or interview several realtors from the area.
Get Pre-Approved For A Loan
Prior to putting in an offer, there should be a plan in place to submit pre-approval paperwork. This can include submitting a mortgage application along with other verifying documents. A mortgage pre-approval letter is an offer from a lender to loan you a certain amount of money. The lender will pull any needed documents to validate your credit, income, and other assets. Having this in place can help to put your offer above any others to show how serious you are about making a deal.
Have Strong Credit
When buying a home, your credit score will determine whether or not you qualify for a mortgage. There are a few websites such as Experian and Equifax where you can receive a free credit report. It is important to do this early in your home buying journey so that you can fix any errors that have been made or so that you have enough time to build back up your credit. Keep track of your score during this entire process.
Make a Solid Offer
Buyers should avoid submitting an offer that is far below the asking price. In this type of market, trying to get a much lower deal than what is being offered can be a waste of time. The fewer houses there are in the market, the less likely you are to land a deal that is much lower than the initial price. If anything, buyers should aim to bid close to or above the initial asking price of the property. Many agents are looking to sell quickly, especially for vacant places. However, they also want the largest amount of profit out of all possible offers. If you find yourself competitively bidding for a home, make sure to stay true to your budget, be confident in what you are willing to spend, and figure out the best pricing strategy with your real estate agent and come up with a solid number.
Stay Away From Contingencies
In this type of market, prices tend to be higher due to low inventory paired with increasing demand. With this being said, it is better to prepare for these price points as opposed to trying to bargain for more, but doing this could potentially turn away realtors.
In order to get the best chance at an accepted offer, minimize your contingencies as much as possible. Contingencies are factors that have to be met before a sale is finalized, such as wanting to move in by a certain date or needing to sell your home first. Having many contingencies can make sellers less confident about the closing actually happening.
However, some contingencies are important, such as having a proper home inspection. When putting your offer together, determine how flexible you can be on your closing schedule and what compromises you are willing to make. Know which contingencies are important and necessary, and avoid any others that may cause sellers to not move forward. Above all else, it’s important that you feel comfortable moving forward.
Write a Personal Letter
Most interactions with a seller are through your respective agents. It can be easy to feel a sense of disconnect between you and your real estate agent. Many of the offers sellers receive all look the same, as they all include general information about the buyer. This process is a personal process, so it is important to keep in mind that the person you are working with is just as invested in this process.
One way to foster a connection is by writing a personal letter. This can set you apart from other offers. Sending a letter to your seller along with your offer can help humanize the connection and bond. Offering a personal note or letter just explaining why you are the perfect buyer for this home could be the determining factor in your offer being chosen. Mention how much this process has meant to you and how you plan to create memories in the home, and talk about any sentimental values you may have for that area. Don’t be afraid to let your feelings come out in this letter.
Sellers also want to make sure that they are leaving the home in good hands, so even just expressing how much you love the home can benefit your relationship with the seller. Also, don’t forget to mention anything that you appreciated about the seller as well such as how well they maintained the home or how well they communicated with you throughout the process.
Put Down A Strong Earnest Money Deposit (EMD)
An earnest money deposit acts as proof to your realtor that you can be trusted in good faith. Typically, a broker will hold on to your earnest money deposit and use it towards your down payment and closing cost. These usually cover about 1% to 3% of the price of the home; however, if you do intend on putting a larger earnest money deposit down, make sure you have intentions of purchasing the home. Your EMD could be in jeopardy if you don’t move forward with the purchase. After the contract has been signed, your EMD could be kept if you do not purchase the home.
Learn From Your Mistakes
Even with all of the proper budgeting and planning, you may not have your offer be accepted the first time around. There could be a number of reasons for this, whether it be because they were offered a higher deal or even just personal reasons. If this happens, no need to worry! Speak with your realtor to figure out where things may have gone wrong, what you can do better, and how you can move forward.
The better prepared you are as a buyer, the better your chances will be in a seller’s market. It is not only important to research in advance but also to not get discouraged. Take everything as a learning experience, and be ready to close the deal when the time comes. Start your home buying journey today, and contact real estate agents Anian Tunney and Adrienne Krumins to help you navigate the market for new homes in Piedmont, Berkeley, and Oakland.