Believe it or not, the housing market is very tight right now. Few homes are being put up for sale, and they're going fast. Buyers are finding that good homes are slipping right through their fingers. So what can you do to improve your odds of getting the right home for you?
According to the National Association of Realtors, the typical home sold in April had been on the market only 46 days, an unusually rapid turnover. Here are a few tips to help you beat the frenzy and ensure you'll be in a good position to snap up the right home as soon as you find it.
1 - Be prepared
The Boy Scout motto is your #1 rule to follow when home-shopping in a tight housing market. That means getting your finances in order, knowing your local market and making sure you'll be ready to make an immediate decision and offer once you find the right property for you.
A tight housing market doesn't mean you should rush into things. On the contrary, it means it's even more important to get all your ducks in a row before you even think about putting in an offer. It's not about trying to beat the crowd; it's about putting yourself in position to act decisively when the time comes.
That means getting pre-approved for a mortgage so you've got financing lined up when you make an offer. It means taking a careful look at your finances, knowing what you can afford and just how far you can go beyond your ideal target price if need be.
You'll also want to have funds available for your earnest money, which you put up to secure the property while the financing is arranged, so you can hand a check to the seller to help clinch the offer. It's a good idea to have your down payment ready as well, though you won't actually need that until the sale is closed.
2 - Know the market
A big part of being prepared is getting to know the market. Take a few weeks to shop around, visiting open houses and touring other homes for sale. The goal is to see what sort of homes are available in your price point, and develop a sense of what sort of tradeoffs you get by adding or excluding certain features, and how prices vary among different neighborhoods.
Try to avoid the temptation of making an offer on one of the first nice homes you find. Yes, competition among buyers is keen right now and you could regret it later if you let a really nice house get away. But at this point, you're still learning how much home your money will buy, so you don't yet have a good sense of what else might be out there or how much you should offer for a property.
Once you've spent a few weeks getting to know the market, you should have a good feel for what home values are. Then when you find a home that you like, you can make a solid offer on the spot that the seller will seriously entertain.
3 - Set your priorities
Everyone has priorities when shopping for a home. Some will be things you consider essential to have -for example, a minimum number of bedrooms and baths, location in a particular school district or a finished basement that can be used as a children's playroom. Other things may be desirable, but perhaps less important - perhaps a large back yard, wood-burning fireplace or certain kitchen features.
You want to identify what's critical and what you're willing to give up so you can quickly focus on those homes with the features you need to have and don't waste time looking at ones that lack them. At the same time, identifying the features that are less important can make it easier to come to a decision should you find an otherwise appealing home that lacks some of those features.
Sometimes, you may not even realize which features are essential and nonessential until you've had a chance to visit several homes with and without them. That's another good reason for scouting the market for a few weeks before you're ready to start making offers.
4 - Use an agent
Particularly in a tight housing market, an experienced real estate agent can be a real boon. They can often alert you to suitable properties that are coming on the market before they're posted on the publicly available listing services, so you can visit them and quickly make an offer if you wish.
An experienced real estate agent can also be useful when it comes time to make an offer, advising you on what sort of price to offer and what conditions you might include that the seller will be likely to accept. If you contract with a buyer's agent to help you during your home search, they're obligation to represent your interests, compared to the agent who is listing the property and is obligated to the seller.
5 - Make the offer easy to accept
Finally, one of the main things when buying a home in a tight market is that you don't want to play hardball when it comes to negotiating the sale. A tight market is to the seller's advantage, so if they don't accept your offer, it's a pretty good bet another will be along shortly.
That being said, you don't want to simply overbid on the home. Offering a few thousand dollars above the asking price will get the seller's attention, but probably isn't necessary unless demand is really high in your area. There's a reason they listed the home at the price they did and, even in a tight market, will usually expect some negotiating.
Avoid loading down your offer with contingencies. Although it's pretty common to make an offer contingent on obtaining financing and the property passing certain inspections, in a tight market you probably don't want to put a lot of demands on the seller. If homes are selling briskly, you probably don't have to worry about including a contingency about being able to sell your own home. And while sellers often grant requests such as refinishing a floor or making certain repairs as sweeteners in normal times, they're likely just to regard them as annoyances when demand is high.
This is money that eventually goes toward your down payment anyway, but pledging a larger amount can show your serious interest. Earnest money deposits are usually 1-2 percent of the sale price, but may be as high as 3 percent in a tight market. Be careful, though - if you decide to back out of the sale (but not if the sale is rejected by your lender), the earnest money stays with the seller. One thing you can do to make your offer stand out is to offer a larger earnest money deposit than usual.