Trying to buy a home in a seller’s market can be daunting. Find out what you can do to cope with intense competition in your search for a new home.
Buying a home in a moderate market is stressful enough – but in a hot market (like we currently have), it can be downright harrowing. Houses are selling very quickly; finding your dream home only to see it snatched away before you can make a move can make even the most optimistic home buyer discouraged. What can you do to survive a wild housing market?
|Before You Shop for a House, Shop for a Mortgage
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First of all, do your research. Find out the current mortgage trends and housing market conditions in your preferred area. Armed with this information, you’ll be in a better position to navigate the craziness of a hot real estate market. These tips will also help:
A mortgage preapproval shows how much money the lender is willing to loan you. It’s firmer than a prequalification, and it lets buyers know that you can indeed meet their asking price. For more on mortgage preapprovals, see our earlier post on How Long Does a Mortgage Preapproval Last.
Some buyers decide to wait until the market cools down, but that’s not always an option for everyone. Even so, don’t be in a rush to accept any property simply because you’re afraid to wait. A new home is probably the biggest investment you’ll make, so choose wisely.
If you decide to actively pursue purchasing a home during this time, this is not the climate to be too relaxed. Check home listings regularly, and immediately contact those you want to see. Make sure your realtor is similarly available and willing to move quickly on prospective deals.
It’s not uncommon for bidding wars to break out in a seller’s market. So, be on the safe side and don’t shop at the highest end of your budget. If you leave some wiggle room, you’ll be in a better position to triumph in a battle of the bids.
Similarly, be mentally prepared for a bidding war. Escalation clauses can be included in your real estate offer to cover this contingency. These basically state that you’ll pay X amount for the house unless the seller receives other offers. If the seller does get a higher offer, you’ll beat it by a certain amount (up to a stated price). Consult your realtor on this one.
Many home buyers rely on things other than their savings to make their downpayment — e.g. a gift, a loan, or government downpayment assistance programs. You don’t want anything to hold up the process, so make sure these funds are available.
Finally, some home buyers are offering the sellers various perks (such as a shorter timeframe or the offer to let the seller rent the house for some months). Others are sending personal letters to sellers explaining why they’re the best candidate. Consult your realtor on this one as well; some contingencies like home inspections should rarely be skipped.
Before you start home shopping, get your finances straightened out with help from the pros at Mortgage 1. We’ll help you get in the strongest position to find a new home in today’s very competitive market!