Buying a home, no matter where can be stressful and challenging. These challenges are amplified in a hot market, also known as a seller’s market.
When you’re trying to buy in a hot market, the demand for homes outpaces the supply. As a result, sellers can charge a premium. There are often bidding wars in popular markets, so you might lose out on a home altogether or end up going over your budget.
While it’s not easy, being prepared to navigate a competitive housing market is key.
The following are things to know and tips to keep in mind.
When you’re in a competitive market, you don’t have any time you can waste. A mortgage preapproval is a must-have. When you get preapproved from a lender, it shows sellers that you’re serious. You should contact a lender well before you start your home search.
You’ll let the lender know that you’re interested in financing. Then, the lender will get information about your income and employment.
A lender will issue you a letter that lets sellers know that you’re approved for a max loan amount and a particular interest rate. You aren’t guaranteed to get the loan if you have a preapproval, but it does qualify you for financing as long as what you provided the lender is accurate.
The lender, with a preapproval, is stating their intent to lend to you.
If a seller has two equal offers, and the only difference is that one buyer has a preapproval, the seller will nearly always pick the offer that’s preapproved.
Work with a Great Real Estate Agent
When you’re navigating a challenging real estate market for buyers, having a great agent on your side can make all the difference.
Along with an agent who’s generally good at what they do and who you get along with well, you want someone specializing in the area you’re planning to buy. You need that insider knowledge to give you a leg up in a competitive market.
A great agent isn’t just going to know what’s going on in the area—they’ll also be able to let you know about listings as soon as they come on the market.
Your agent will also know how to make your offer stand out when the time comes.
Be Very Clear On What You Want Ahead of Time
You can’t go into a competitive market without knowing what you want and what you’re willing to live without. Make a list of your must-haves.
If you’re able, go to the neighborhoods you’re considering buying in, and walk or drive them. Figure out if you can really see yourself living there.
You don’t want to waste any time in the process, so the more legwork you do ahead of time, the better.
Realize You’re Going To Have to Compromise
A lot of whether or not you’re successful as a buyer in a market that’s competitive is going to come down to accepting the fact you are going to have to compromise. You will have to find ways to make a home that’s potentially good enough rather than perfect work for you.
When you’re flexible in your expectations, you’re more likely to find a home.
Be Ready to Offer Good Closing Terms
If you can show sellers you want to close a deal, they’re more likely to accept your offer. Depending on their situation, the seller may have their own ideas about what makes for good closing terms, but your agent should be able to figure out what will be compelling to them and include it in your terms.
You also shouldn’t include too many contingencies, if any at all.
Depending on the situation, you might also want to think about including an escalation clause. You can be more enticing to a seller. With an escalation clause, you’re automatically outbidding any offer by a given amount, but only to a certain point.
However, you have to be careful with escalation clauses and listen to your real estate agent. Sometimes they can backfire because the seller might wonder why you didn’t just offer a higher amount in the first place.
Make a Good Down Payment
If you aren’t ready to offer a pretty significant down payment, you may not be ready to buy in a competitive market.
Finally, to buy in a hot market, you have to leave your emotions behind. Don’t get so wrapped up in any one home, for example, that you make a bad financial decision.
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