5 tips for buying a home in a competitive market
(BPT) - Buying a house in a hot market is always a challenge, and if you’re jumping into the fray at the end of the home buying season you might be tempted to think the situation is hopeless. But all is not lost.
In reality, home sales tend to be less seasonal in competitive markets. While it’s true that families with school-age children like to move during the summer, other potential concerns, such as the risk of not attracting buyers to showings in bad weather, or the greater difficulty of making repairs during the winter, are less relevant in a seller’s market. And the underlying factors that lead people to move — such as changes in employment, financial status or family situation — tend to arise fairly regularly throughout the year.
So don’t despair — a new home may still be within your reach. If you want to increase your odds of success, consider these five tips for buying a home in a competitive market.
1. Surround yourself with a good team.
A home purchase is a major investment, so you’ll want to work with a lender whom you trust. Shane Patnoi, vice president and consumer lending manager at Washington Trust Bank, says, “Find a lender who will partner with you to identify the best loan for your circumstances (considering both the immediate and the long-term costs of the various options), who will explain the entire process clearly, and who will be responsive and move quickly when a purchase opportunity comes up.”
Your real estate agent is crucial as well. You don’t want to wait until listings appear online or yard signs go up — you need someone who will hear about new listings immediately and move on your behalf. Good agents know the characteristics of different neighborhoods and can identify up-and-coming areas. They also have a deep understanding of local market conditions and price trends and are able to help craft reasonable and appealing offers.
2. Work with your team to develop a plan of action.
Prioritize the criteria you’re looking for, and talk to your real estate agent about which are must-haves and which are merely nice-to-haves. Agree to make yourself available to view new listings as soon as possible — those homes could disappear if you wait until the weekend. Discuss price strategies, options to sweeten an offer (say, by making a larger earnest money deposit or delaying buyer possession) and ways to make an offer more cash-like (that is, by eliminating as many contingencies as possible), and work with your lender to identify tactics to speed up the closing process.
3. Get pre-qualified.
Before you start your search, you’ll need to know the approximate size of the mortgage you can qualify for. Pre-qualification is an easy first step that will give you a good grasp of how much you can afford. It also allows you to have a formal conversation with your lender to help prioritize your goals and develop a strategy to purchase the right home for you based on your finances.
4. Set aside enough cash for a competitive down payment.
Sellers will see you as a more serious buyer if you’re prepared to make a larger down payment. Keep the money in a high-interest savings account so the funds are liquid and easily accessible, and be ready to provide proof of funds to show the seller that you actually have the down payment and closing costs covered.
5. Prepare for the unexpected.
Keep an open mind and be ready to compromise. You may not find a home that meets all your ideal criteria. You might need to consider living farther out, or taking a bit of a chance on a transitioning neighborhood that’s becoming more desirable. Or you might find a diamond in the rough that needs a makeover but could be a good investment.
It’s easy to panic in a hot market, when all the reasonable options seem to get snatched up immediately, but there will be other houses. Be patient, and be ready to walk away if a property isn’t right for you. Don’t let yourself be pressured into overpaying, or buying a home that needs more serious renovations than you’re realistically prepared to deal with.
If you lay a strong financial foundation, do your research and assemble a strong team to help you, you can find home buying success in a competitive market. For more information and home buying resources, see the Washington Trust Bank Home Loan Center at https://www.watrust.com/personal/borrowing/home-loans/.