Yes, being a buyer in a seller's market is tough - learn how to be the best buyer you can be to get the home you want!It hasn't been like this in years, but 2020 real estate has become a seller's
How to be the Best Buyer in a Seller's Market
Dated: October 24 2020
Yes, being a buyer in a seller's market is tough - learn how to be the best buyer you can be to get the home you want!
It hasn't been like this in years, but 2020 real estate has become a seller's market. Crazy right? Buyers are finding themselves in bidding wars, getting beat out, and learning they need to settle some. Its not completely unavoidable, but there are things you can do to put your best foot forward.
1. Adjust your expectations.
Yes, this is true. While your sister may have gotten a steal on a home a year ago, you probably won't. The good news is that rates are VERY low right now - so you can afford more. Play with the numbers here https://www.corbymortgage.com/mortgage-calculator/ At the time of this writing, rates for a 30 year loan were under 2.75%.
With inventory low, you might have to adjust your wishlist, or be prepared to do a little fixing up yourself. Sellers have less incentive to do repairs right now, and most people have the same wishlists. Think about what is most important to you and what you cannot change. Location? Yeah, you're not moving the home. Really want a basement? Likely not digging one out. But updated kitchen? Wood floors? No wallpaper? You can do those things.
2. Talk to a lender sooner rather than later.
Do not wait. Your lender is your friend. Go with someone you have gotten a personal recommendation for - NOT just a call or random click. We have a list of trusted lenders we are happy to send you. Lenders can get going on what you need to do to be in the best fiscal position long before you see a house. They can help you clean up credit, and will give you a realistic idea of what you can afford, or catch issues that might preclude you from buying now. If you wait to get a preapproval until you find a home, you may be too late.
3. Save for a downpayment
Contrary to popular belief, you do NOT need 20% down to buy a home. There are may conventional loans that can be sometimes even only 3% or 5% down. But when you are making an offer, a CONVENTIONAL offer with higher down payment will be preferred by a seller and their agent, than one with a lower downpayment or FHA. Another reason to talk to that lender, so you can see if you can qualify for conventional, or work to bring your scores up. They will also tell you what NOT to do, so that your score doesn't drop. Having cash on hand also means you might not need closing credit, which strenghtens your offer.
4. Make a strong offer
Gone, for the most part for now, are the days of throwing out a lowball and seeing what happens. Most sellers won't even entertain them, and then you've already made them unhappy. Even if you come up a lot, they may just choose to move on. Everyone wants a deal, but think about what an extra $1000 on your 30 year loan, at low rates means to your monthly payment. Very little. For every $1000 is aout $5.
What do sellers and their agents look for in an offer? A few things:
- Closing credit (it reduces the price - so if a house is listed at $200,000; and you offer $200,000 with a $5000 closing credit, you're not making a full price offer - you're offering $195,000)
- Loan type (Cash is always king, but conventional offers with higher down payments usually beat FHA)
- Earnest Money - this is money that you are putting down wiht the contract that will go to your downpaymnet. Around here, its not high, but making it a little higher shows you are more serious sometimes)
- Closing Date - This can vary - if you have flexibility, make sure your agent expresses that
- Contingency - If you have to sell another home, this is a negative. It can't always be avoided, but keep in mind your offer needs to be really strong if its true.
- As-Is -- really like the house and want it, agreeing to As Is might win you the bid -- you can (and should!) still have an inspection, and if something major comes up you can still back out of the deal or try to renegotiate - but that would only be major unforseen issues.
5. What else can I do?
Well, your agent can add an escalation clause - sayign you'll beat any offer by $x up to a certain level. So say you put in an offer at $200,000. And you add an escalation clause that says you'll beat any offer that comes in by $1000 up to $215,000. And an offer comes in at $210,000 - then you might be able to get the house at $211,000. But its no guarantee.
6. The Personal Letter
Yes, it works in many cases. Tell the seller why you want the house. What about it was meaningful to you, a little about yourself and how you see yourself in the home. Make them WANT to sell the house to YOU.
Most importantly, work with an agent that has great experience helping clients navigate these waters! Call or text us today at 708-251-1500 or email email@example.com to get started!