With interest rates at an all time low the real estate market is seeing a flood of buyers enter the market. These buyers have realized that with lower interest rates they can actually afford a more expensive house with keeping their monthly payments lower. This has built more competition into the home buying process than ever before. We are seeing more and more buyers missing out on their dream homes by loosing in competing offer situations. Here are five tactics to be sure that you will beat your competition and win in buying your next home!
- Get Representation – Buying a home in 2020 has become something of an up hill battle. You need someone by your side to educate you and hold your hand through the process. This someone shouldn’t be your parents, your friend that just bought a home, or your uncle that has dabbled in real estate investing. You need a professional Realtor®! Someone who handles real estate transaction day to day and is bound by a code of ethics to protect and promote your very best interest in the transaction. Having an agent in your corner will give you the edge over buyers that are going unrepresented. You will have a dedicated advisor to make sure your offer is as strong as it can be.
- Get Pre-Approved – A pre-approval is a letter from your lending institution explain that you are a good lendee and you shouldn’t have any problems getting a mortgage. When a seller is looking at offers they will look at an offer with a pre-approval attached much more seriously than than an offer that does not. This not only gives you a leg up on your competition but it also gives you more of an idea of what you can afford. The lender will give you budget of what you can afford as far as the cost of the homes you should be looking at. This will also inform you on how much you can expect for a monthly payment including taxes and insurance and how much money you can expect to bring to the table close the deal.
- Have Money In The Bank – Buyers with more money in the bank will have the advantage over buyers that are stretching their budget. When purchasing in a seller’s market the likely hood of the house selling at a discount are very low. Being in a position to offer more than asking price will give you a greater chance to win in a competing offer situation. In that same aspect if you have more money in the bank you can cover more of your own closing cost and in turn netting the seller more money than a buyer that may need the seller to cover closing cost because they simply can’t afford it.
- Reduce Risk To The Seller– When a seller is examining offers they are looking at two things; how much will I net and how much risk is associated with accepting this offer. To win a seller you must be the best answer to both of their questions. We talked about netting them the most amount of money in number 3. To reduce the risk of the seller their are a number of things you can do. The first thing would be to offer a “higher than normal” earnest money deposit. This is a deposit to a third party escrow company that shows how serious you are about purchasing the home and if you break the contract you could loose the money. A higher earnest money deposit will take the risk of the contract falling apart from the seller. The other area of risk for the seller is inspections and repairs. I always recommend my buyer to get inspections on a property, that being said you are the buyer and have the final decision, if you walk through the house and feel comfortable with reduce the number or types of inspections, this will ultimately release any liabilities of repair from the seller and you will come out on top. You can always get inspections after the deal closes and create a “New Homeowner Checklist” of things to tackle over the next couple years of home ownership.
- Don’t Over Pay For The Home – With buyer’s bending over backwards to win in competing offer situations you can see how home prices have increased. This is where you need to add caution to your home buying and not over pay or buy a home that will need a ton of repairs. Your agent should be able to pull recently sold homes in the area you are looking in and tell you what a top dollar offer should be capped at. The appraisal should help with this as well but if their are multiple offers they have to take those into account as well so we have seen appraisals coming in that were surprisingly higher in order to reflect the demand of the market. Ultimately the price you pay for the home should reflect on the motivation you have for buying if you are in dire need of a home and you have a strict timeline to abide buy you may need to pay a little more for the home rather than a buyer that doesn’t “need” to buy as bad. Just keep this in mind and have this conversation with your Realtor® when the time comes.
If you would like more information on buying a home we would be happy to sit down with you and explain the process and work with you in finding and successfully purchasing your next home. Give us a call at (785)256-0570 or reach out to our Facebook page!