Emboldened by low-interest rates, rising rent prices, and a stronger sense of job security, more people are making the leap into home ownership. But as they do, many face fierce competition, limited choices and the pressure to act quickly.
The biggest challenge for many would-be buyers is that there are not enough homes on the market. In some areas with low inventory, homes are being snatched up within a matter of days. What is considered good for homeowners, it’s not a great scenario for potential buyers.
In short, it’s getting harder to find a good deal.
So what should home buyers do in such a tight market? Here are a few steps people should take to increase their chances of landing the winning bid — and to protect themselves from paying more than they should.
Before you do anything, get a pre-approval letter. You only need to get one. The pre-approval shows the seller that you have been vetted financially. It also gives you an idea of how much of a mortgage you can afford so that you can limit your search to houses within your price range.
In some markets, you may not get to see a house more than once or twice before you move in, so a pre-approval letter also can help you act quickly when you see a home you love. Keep in mind, however, that a pre-approval letter is not a guarantee for a mortgage, brokers say. So be ready to check with other lenders.
Make sure your broker knows the competition. Knowing how many people are interested in the house can help you come in with an offer that will be taken seriously. Your broker might be able to find out from the listing agent how many people came to the open house and if it is likely to receive multiple offers, which means buyers should prepare for a bidding war.
Be flexible with timing. You can improve your chances of landing the home you want if you can show that you are willing to move as quickly — or as slowly — as the seller needs. A seller looking to close the deal within 30 days won’t be too interested in an offer from someone who won’t be ready to move for 60 days. The same for a seller who needs more time before moving out of the property.
Tug at the heartstrings. Are you and the person selling your home both veterans? Can you already picture little Jonnie playing on the tire swing or attending that great school in the neighborhood? When sellers are facing multiple offers, getting a personal letter from buyers that shows why they love the house or how they plan to use it might help to set the offer apart. Sure, many sellers are just going to go with the highest bidder. But some people with emotional attachments to the home they’re selling may want to know it is going to a family or couple that will look after it and appreciate it as much as they did.
Get a pre-inspection. Anything you can do to speed up the buying process and make it easier for the seller might improve your chances of getting the home you want. For example, some people might pay for a pre-inspection before they make the offer so that they know ahead of time if the house is in good condition. That eliminates the need for further negotiation with the seller after the offer is made.
Pay more cash up front. Really. Not all home buyers need to put 20 percent down when they make an offer on a home, especially when earnest money is cash provided by the buyer, ranging from 1 percent to up to 5 percent of the purchase price, that gets held in escrow until the sale closes.
