The market today is as competitive as we have seen in years. Inventory is very low and demand is high. This year we are working hard with our business partners to ensure that our clients are best positioned to have their offer accepted in a multiple offer environment.
It is not only difficult to find a home that you love, in the right neighborhood, but also difficult to win against other offers on the same property. These tips will help home buyers as they navigate the current market environment:
1.Do your mortgage homework upfront.
This will save you heartaches and time once you are under contract. The pre-qualification process can be detailed. It is important to give yourself the time needed to become familiar with the financial details and find your comfort zone. If you put in the time upfront, you will be well positioned to make quick decisions when the time is right.
2.Consider getting a commitment letter from your lender upfront.
It is necessary to have your pre-qualification letter in hand when you go out shopping for a home. In today’s market, we find it very helpful to take it a step further, and get a commitment letter upfront from your lender. The difference between a pre-qualification and a commitment is huge for a seller. It means that your mortgage loan has been reviewed and conditionally approved by an underwriter, significantly reducing potential changes or surprises once you go under contract and shortening the financing contingency in your contract.
3. Be prepared to put time into the process.
Obtaining a mortgage loan is not as easy as it used to be. Your loan officer should be available and responsive, making the process run smoothly, but the process works best with responsiveness and cooperation from all parties, buyer included. Be prepared to buckle down.
Many clients find that they end up looking at far more homes than they expected. Do not plan to make judgments from the many mobile sites or apps that are out there. You may be surprised (both pleasantly and unpleasantly) when you see a home in person.
4. Get a good handle on both your comfortable monthly payment and the total cash to close.
Many buyers are surprised to find out that there is a difference between the down payment and cash to close. Understanding and being familiar with the difference will help to determine the mortgage product so that it is not left to be figured out after you are under contract. (PS: Read More About Closing Costs Here In A Previous Blog!)
Since this market is so challenging, we asked a few of our trusted real estate agents to weigh in on the issue at hand. They have offered some very strong suggestions, based on their experiences.
Kyo Freeman of Dwell Residential recommends:
1. Have a pre-qualification in hand. “The next house that you go to may be the house that you want to put an offer on and time will be crucial. You don’t want to start the process of getting preapproved while someone else who is already preapproved gets the house that you want.”
2. Be very clear on how much money you are willing and able to spend. “In a competitive market, many homes go above asking price. Know your limits so that you can make a reasonable decision about the finances when it’s time to negotiate.”
3. Do what you can to ensure the sellers know you are serious. Can you make a larger earnest money deposit? Can you remove or shorten contingencies? All of these things will stress to the seller that you are serious and ready to move to get to the closing table.
Chris Itteilag of Washington Fine Properties added:
1. Flex your financial muscles. “If you can’t purchase all cash, I recommend you speak to your lender to see if they can get you fully approved (that’s the commitment letter!) upfront before you make an offer. This will essentially allow you to write an “all cash” offer (with no financing contingency), however you will likely still want to include an appraisal contingency, if possible. Check with both your lender and agent on the pros, cons and risks involved when including or excluding a contingency. I would also recommend putting down a large down payment and earnest money deposit to let the seller know you are a very serious and financially qualified buyer. Your earnest money deposit eventually goes towards your down payment so you can simply make your earnest money deposit as large as your down payment!”
2. Pre-Inspection.“I always recommend a home inspection, but when dealing with a competitive market, you need to get creative. Sellers love to see offers without a home inspection contingency. So how do you satisfy both? If possible, see if the seller will allow a pre-inspection. This is basically a quick “walk & talk” home inspection or full home inspection by a licensed home inspector prior to submitting an offer. The purpose is to identify any major (or minor) issues with the home, so the buyer is comfortable writing an offer without a home inspection contingency. Often, timing can be an issue. It can be difficult to get a home inspector scheduled on short notice. This is where an experienced and well networked buyer’s agent comes in handy. A strong agent will anticipate this and be prepared at the slightest hint of a pre-inspection. If you can’t get a pre-inspection, the next best option would be to write in a very short home inspection contingency period, only if you know you can schedule a home inspector in advance.
Both Chris and Kyo believe that having a strong buyer’s agent to represent you is the most important thing a buyer can do to position themselves to compete, and win, in today’s market. While this may seem obvious, it is often a place where people get stuck. It is not only about knowing the market but about knowing the people in it! The market knowledge and credibility that can come from a strong buyer’s agent and their firm, will make your offer more appealing to the seller and the seller’s agent.
“A experienced agent will know the process and market well, but a successful agent will have an invaluable network. They will have a strong reputation within the industry and leverage their relationships with other agents, brokerage firms, lenders, home inspectors and sometimes even the clients on the other side of the transaction! This is invaluable and will always work in your favor.” – Chris Itteilag
Anything that a buyer can do to position themselves above other offers should be considered when navigating the home buying process. Do not hesitate to ask questions of both your lender and your agent – they are meant to be a resource to help you achieve your goal of home ownership.
