season tends to flood the housing market with buyers, and in markets with low inventory levels, the competition is stiff. As home prices continue to recover and interest rates remain at near-record lows, some houses are receiving multiple offers and to win the bid, buyers need to stand out from the crowd.
Since markets are moving fast, experts recommend sellers have their loan pre-approved and down payment ready before starting their search. Inventory is low and demand is high—a buyer needs to know exactly what their parameters are before beginning the search.
Multiple bids are becoming the norm, so buyers should be ready to compete and do their homework to seal the deal. Being reasonable without being difficult is important because until an offer is signed, sealed and delivered, other buyers can bid on the property.
While you have to compete in the current market, maintain your budget. Experts warn against cutting corners like skipping the inspection or engaging in a bidding war. To help you become a homeowner in this competitive market, experts recommend the following tips for being the most attractive:
Check your credit for accuracy and avoiding making any big purchases or taking on any big debt during this time. If your debt-to-income ratio is too high, experts recommend paying down as much debt as you can to lower this ratio.
Set Your Home Price
Less supply on the market increases the likelihood for multiple offers, and you want to be able to compete. If properties are selling at 95% of asking price, don’t think you’ll get a deal at 85% of asking price. If you do spot a great deal on a house, don’t wait days to make an offer. Since time isn’t on your side, learn how to spot a great deal by researching an area’s home prices. Being educated will help you negotiate and could prevent you from paying more for a house than it is actually worth because you’re emotionally involved.
Know that Cash is King
The more cash you have, the more appealing you are as a buyer. Putting 20% or more down makes you look more financially stable and gives sellers comfort that you’ll qualify for a mortgage. Cash can cover a multitude of problems when you make an offer, whether it’s difficulty with the mortgage process or a lower-than-expected appraisal. If your appraisal is low, don’t expect the appraiser to come up in value. Appraisers are under scrutiny with the banks and they have to justify everything they do. Appraisers use surrounding properties for comps and if there are only foreclosures, that is a bad hand to be dealt. You can always review the appraisal for discrepancies and suggest different comps but don’t expect the value to change.
Get Pre-approved before Your Search
Getting prequalified for a mortgage gives a ballpark for what you can afford to buy and will streamline your search process. If you’re financing your house with a mortgage, have a pre-approval letter with you and if you’re paying cash, have proof of funds that shows you’re good for it.
Limit Your Contingencies
Experts suggest having as few contingencies as possible to be an alluring buyer. Certain contingencies based on your ability to get a mortgage, the appraisal and home inspection are standard, but piling on more could make the seller less inclined to work with your offer. Experts advise making an offer based on a satisfactory home inspection. It gives you the opportunity to walk away if you find in an inspection that there are too many problems with the house.
Add a Personal Touch
Some brokers suggest sending a letter to explain why you want to buy that house. You become a person who really loves and appreciates the home instead of just a number. Sending a letter is just one extra little thing that will help level the playing field.
Be Flexible with Closing Dates
Let the seller know that you would be flexible on the closing timeline. Find out when the seller would ideally like to close on the house and see if you can match it.
Source: Published March 21, 2013 FOXBusiness