Real estate markets always go through cycles, but the current market is unique in the fact that interest rates are low, lending is still tight, and home prices are rising in most parts of the country.
The key to successfully buying a home in this type of market is preparation. Preparing for the purchase of a house is just as important as the offer you make. We've provided the following tips for just this reason—to help you prepare for buying a home in a rising market.
Find a good agent
A good real estate agent is worth every penny they make when you're looking to buy a home. This is especially true in markets where multiple offers are surfacing. Parts of the country, like California, require mounds of paperwork and regulations a buyer must complete in the transaction. Having a good real estate agent to help you navigate these waters is invaluable when negotiating for a home.
Getting a jump on new listings is also key to buying the house you want in a competitive market—having a good agent that's connected makes all the difference when it comes to "hot" listings.
Get pre-approved—know what you're worth
When you're negotiating in a real estate market where multiple offers abound, the cleaner the offer the better your chance of closing the deal.
Sellers love buyers who have their financing already approved. They gravitate to offers where they don't have to worry about whether the buyer can come up with the money; as a buyer you have a position of strength to negotiate with, so getting pre-approved should be at the top of your to-do list.
There's one more advantage of getting pre-approved—your credit report. The worst thing that can happen is to make the deal, then find out that there's a problem with your credit report. This can be an error (which occurs more than you might think), or there could be something you forgot about that stalls the loan approval. Getting pre-approved will avoid any of these problems, and if something surfaces you'll be able to fix it before negotiations start.
Lead with your best offer
In a real estate market where multiple offers are presented, come in with your best offer. How do you know what the best offer is? Here are two things to help you come up with the right figure. First, you will need to rely on your realtor for this information. It's a fairly easy task for them to run recent comps in the area to assess a competitive number.
Second, in this current market we know that the median sales-to-list-price ratio is 97 percent. If you're serious about buying a home, then this number will help you determine a realistic offer for the area you're looking in.
Making an offer clean and attractive
Let's say a seller is looking at three offers with similar offer prices, which will they choose?
And what constitutes a "clean offer"? This is where your agent comes in. If he or she can pry information from the listing agent concerning what the seller wants or what's motivating them to sell, then you will have a huge advantage over the competition. A bigger down payment might make the seller feel more comfortable, or they may shy away from offers where there are too many contingencies.
Structuring an offer that appeals to the motivations of the seller will get you the house, and your agent is vital to the success of this tactic.
Be patient, or you'll become one
You have a good agent, you know the reality of the current real estate market, but you can't find a home. Buying a home can be stressful and wrought with anxiety, especially when the market is tight. Emotions run high, you start to consider homes that you really don't want or maybe you're afraid to lose out on the next real estate boom?
The reality is, no one knows if this is a sustainable "boom" or not. What counts is that you buy the right house at the right price for you. Knowing what you need in a home and what you can afford will keep your emotions in balance.
Many people who let their emotions get the best of them at the height of the market are now feeling the pain. Following a few basic tips will help you successfully navigate this current market environment.