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How To Be The Perfect Home Buyer
Whether you are a first time homebuyer or have bought many times before, you have to take steps to ensure your offer stands out in an extremely competitive housing market.
Buying a home is stressful at the best of times, and we are currently dealing with a real estate market that is more competitive than ever. Due to a massive shortage of homes available on the market and historically low mortgage interest rates, the average seller receives 5.1 offers from buyers that are eager to buy their house. However, some homes receive up to 20 or 30 offers, and sell for much more than their original asking price.
If you are house hunting for your dream home, you have to take steps to make sure your offer is competitive, especially in a multi-offer situation. In addition to wanting to make the most money on the sale of their home, sellers may also be looking for certain terms to sweeten the deal and ensure you won’t fall out of escrow. As a buyer, the best thing you can do is be prepared and stay flexible. Follow these tips to help your offer get accepted on your dream home!
Work with a professional real estate agent. Don’t try to buy a home all by yourself! Use an experienced real estate agent who can help you find homes, negotiate, and navigate the escrow process. If possible, choose a real estate agent who is already knowledgeable about the areas that interest you. If you don’t already know a realtor, start by asking your family and friends for recommendations.
Mortgage pre-approval is essential. Whenever possible, paying for your new home in cash should be your first choice, and will definitely capture the seller’s attention. But if you will need to get a mortgage, you can still be competitive against cash buyers as long as you are pre-approved for your home loan by your lender or mortgage broker. When you place an offer on your dream home, make sure it includes an official pre-approval letter and proof of funds that show you can afford your down payment and closing costs. This reassures the seller that the bank has already looked at your income, assets, and credit score and that the bank will be ready to hit the ground running on the processing of your home loan as soon as your offer is accepted. In addition, you will have no doubts about how much you can comfortably offer for a new home, and won’t run into any unpleasant surprises later.
Have a competitive down payment. When you buy a home, the sellers will scrutinize every part of your offer before choosing if they will accept. Increase your chances of getting a yes by submitting an offer with a competitive down payment. Sellers often consider it riskier to choose a buyer with a low down payment. In general, the rule of thumb is to have a down payment of at least 20%, but that may vary depending on your specific circumstances.
Find out what the seller needs. If you have a savvy real estate agent, they’ll likely call the seller’s agent to find out what the seller needs in the transaction. For example, the sellers may be looking for an offer that will allow them to lease back their home after the close of escrow in order to find a new home or let their children finish out the school year. Alternatively, the seller may not want to deal with repairs or maintenance that are identified during inspections in escrow. By knowing the terms the seller is looking for, you can submit an offer catered to the seller’s desires that makes it easier to choose you.
Sweeten the deal in other ways. If your dream home is caught in a bidding war, sweeten your offer wherever you can. For example, you can offer reduced contingency times for inspections, appraisals, and final loan approvals. However, check with your lender first to make sure this is possible. Some buyers will waive their contingencies completely to show sellers how much they want the home, but don’t do this without consulting with your agent first. Waiving contingencies completely will show your interest, but this action will also put your deposit at risk if you fall out of escrow. Instead, your agent may advise you to put down a larger down payment or make a larger earnest money deposit, which will send the seller the message that you are a great buyer who is eager to close the deal.
Put your best foot forward. In a multi-offer situation, you may only get one chance to impress the sellers so don’t rely on receiving a counter offer to negotiate. In the current market, it may be wiser and easier to simply present your best offer at the very beginning. By including your best offer price and terms you know the seller needs up front, you will likely be kept in the running even against higher priced offers and cash offers.
Do not write personal letters to the sellers. Letters that show the buyer’s emotional attachment to the home and give insight into the buyers’ personalities used to be commonplace, but now are considered highly inappropriate. Including such a letter with your offer may even violate Fair Housing Laws if they reveal information regarding the buyer’s race, gender, familial status, disabilities, or other protected categories. This type of information needs to be omitted as the seller is not allowed to use this information to determine if they will accept an offer or not.
Think outside the box. If you aren’t having any luck buying a home in your current location, you may need to change your strategy or consider if there are other areas where you’d like to live. For example, people who work from home may be able to live farther away from city centers and work hubs. If you are someone who enjoys a DIY project, you may also find more success buying a fixer upper home that you can make your own instead of a move-in ready house. Homes that need cosmetic updates or repairs may see less competition and can usually be purchased for more reasonable prices.
Know when to walk away. Sometimes, it is better to walk away from a negotiation instead of overpaying. Have frequent strategy sessions with your real estate agent to discuss what your maximum offer should be, and how much risk you are willing to assume in order to have your offer accepted. Be prepared that the negotiation process can take a while, and you may have to submit several offers before you are successful. However, there are times it simply isn’t meant to be. This may be disappointing if you really loved the house, but know that it means your dream home is still out there waiting for you to find it. When the right property does come along, you will be that seller’s perfect buyer.