The housing market is staying hot and difficult. Here are some strategies for boosting your chances in the ongoing tug-of-war between supply and demand.
Rank your wishes
You probably already have some idea of what you want with this new home. Put all of that on a list, then sort it into wants and needs. The wants are things you might enjoy, but wouldn’t miss. Examples include a double garage or panoramic windows. If the home doesn’t have them, that's not a deal-breaker. The needs are non-negotiable. They are features in your new home you absolutely cannot live without. Examples could be a separate office or smart security. Homes without those aren’t worth your time.
If a home meets your minimum non-negotiables, consider whether you’re willing to give up some of the wants and make an offer. If it doesn’t meet your needs, move on to the next property. Keeping the “need vs. want” constantly in your mind helps you make decisions faster and stay on top of the market fluctuations.
Prepare “earnest money”
“Earnest money” is like a deposit. The seller takes it when they accept your offer in exchange for taking the property off the market. It’s collateral to ensure you won't break the deal, and usually totals at 5-10% of the sale price.
This money is deposited until the purchase is closed, then it goes back into your down payment. You can mention it in your offer to strengthen your appeal, but you don’t need to pay a penny unless the offer is officially accepted.
Get pre-approved for a mortgage
You need to be able to demonstrate how much you can offer. You need a pre-approval letter. This is a document from a lender (e.g. you bank) which confirms your mortgage qualification. It determines how much you can offer on a house. Doing the pre-approval is the only way to find out how much you can afford. It takes into account your income, credit history, current interest rates, and your down payment.
Moreover, home sellers will want to see the letter to make sure you are a serious buyer. It’s a guarantee to them that you can pay the money you offered them. Remember to ask about special programs such as a first time buyer mortgage or closing costs assistance. The specific documentation needed for a mortgage pre-qualification will depend on your lender’s requirements and your financial situation. Typically, you will need some kind of identification, bank statements, and tax forms (usually your W-2 statement).
Choose the right realtor
Take the time to find a real estate agent you trust and resonate with. They have to understand your priorities and respect your boundaries. Be thorough and shop around for your ideal agent, just like you would for any other expert. They are your potential business partners. Realtors have different areas of expertise, different portfolios, different contact networks.
Do your research. Find reviews and testimonies from their past clients. Schedule consultations with several agents, ask questions, and compare impressions. Look for someone who is experienced, reputable, and with whom you feel comfortable. The right realtor can make the whole process immensely easier. They can tell you what to expect when home-shopping and what to look out for. They’ll analyze home contracts and protect your interests and money.
Make strong offers
In today’s competitive home market, be aware that you’ll be bidding against ten or twenty other potential buyers at any given time. Learn some tricks to make your offer stand out from the competition. Consider doing one or more of the following:
Offer a higher price (if within your budget)
Include proof of “earnest money” (e.g. check photo) with your offer
Make a larger down payment
Let the seller pick the closing date
Reduce the number of contingencies
If you’re a first-time buyer, you may be tempted to require many contingencies. These are things you demand before closing the sale. Examples include appraisals, inspections, insurance, approval of financing, or selling your old home first.
These are all reasonable requests, but they extend the timeframe for the sale. Waiving some of them gives the seller the chance for a quicker deal and boosts the attractiveness of your offer. Try to compromise between speed and safety.
To sum up, sort your priorities and your budget. Select your realtor carefully, and write strong offers that stand out. Good preparation gives you much higher chances in the house-hunting competition.
By Mike Johnston
