How to Buy Property in a Hot Housing Market
The housing market is not overheated, it is on fire . According to the National Association of Realtors, both post-pandemic home demand and supply shortages have driven the average selling price of existing single-family homes up 16.2% year-on-year during the first quarter of 2021. It takes patience and a willingness to walk away to navigate the seller’s marketplace – here are some tips on how to get a great deal on a new home.
When shopping in a hot market, be prepared to wait
If you are a buyer, you can wait until the housing supply is restored, or at least to wait because you may not have a choice – 64% of the active home buyers looking for more than three months in the first quarter of 2021, while 45% of these buyers stated that due to interruptions, they were unable to buy a house. In less overheated periods, the average time it took to find a home was about 56 days , so that’s a big difference.
Moreover, you do not want to rush to the seller’s market with the need to make a purchase. As an example, if you are selling your existing home while trying to buy a new one, consider a backup plan for where you will live if it takes longer than expected to find a new home (Bankrate has some good tips on what to do here ). Without the burden of time constraints, simply being able to say no bye will help you find a better deal.
Get a pre-approved mortgage
Pre-approving a mortgage demonstrates to sellers that the lender has verified your creditworthiness and that you are a serious bidder willing to move the deal. And getting a mortgage is time-consuming and paper-intensive, so getting it done ahead of time will give you an edge over other less organized buyers. This process will also clarify what your budget for buying a home will look like: you will learn how much of a potential monthly mortgage payment might be based on your income, down payment, and credit score. You can then use this information to set the limits for your final home buying budget before you go into the home bidding war.
Find a good realtor
While you need a realtor who is an experienced negotiator, you also need someone who is patient, objective, and resourceful. A good realtor should be able to explain the housing market using comparisons with similar properties that have recently been sold, ideally in the same area as the proposed home. If you have unrealistic expectations, it sometimes takes a smart nudge from your realtor, but you should never feel that they are trying to influence your opinion or rush your decision.
Also look for homes with expenses below the limit.
Don’t just look for top-rated homes as you are more likely to get a higher price for many of the homes on the seller’s market. Instead, consider making concessions about the type of home you will own. This is why it is a good idea to make a list of your “needs” and “wants” for your home early in the home buying process, as this will help you find an acceptable compromise later. These trade-offs could include finding homes in areas you’ve never thought of before, or perhaps homes with fewer amenities, such as one bathroom instead of two. Depending on your situation, these concessions may seem rather small compared to the monthly savings on mortgage payments.
Make Home Inspection Simple
You shouldn’t give up on a home checkup , as it can leave you vulnerable to undetected structural damage that can cost a lot of money to repair. Instead, you can offer “informational” inspection, which means that you will not use inspection to solicit price concessions from the seller. At the same time, you can still abandon the transaction based on what was found during the checkout.
When shopping at the hot market, consider sweeteners.
If you are bidding, try to ignore the price on the label and understand what is important to the seller. The seller may be trying to take advantage of the market conditions but doesn’t really want to move: in that case, you could offer a leaseback agreement as part of your bid, allowing the owner to stay in the home for several months after closing. Or, if the seller is in a hurry to move, offer to buy some of their bulky furniture as part of a deal. Your job as a buyer is to make the sale as painless as possible for the seller.