There is still a serious shortage of homes available in most price ranges of our highly desirable neighborhoods. We continue to see some all-cash buyers, people coming with investment capital from overseas, and all-cash investors still on the hunt for suitable properties. Before you embark on your own home buying journey, here are some of the most pervasive dos and don’ts when buying a home, especially when it’s your first one.
Increase Your Odds in a Competitive Market: The Do’s
What does a buyer need to do in order to increase their odds of succeeding in such a difficult market? There are several actions that will significantly increase the chances of success.
DO: Become educated about the current housing market conditions and recent trends
Become familiar with the current inventory and prices. Compare properties with properties that sold over the past several months that might have been suitable to meet your needs. Be aware of the average prices per square foot and the price increase percentage over the past year.
Be sure to engage a seasoned buyer’s agent who has successfully represented at least several buyers in the last year or so. Be vigilant and diligent in doing your own searching. A home seeker sometimes will notice an opportunity or option that their agent may not have considered suitable.
DO: Get yourself financially ready to pounce
Unless you are an all-cash buyer, it is crucial to be pre-approved by a major or at least well-known lender. This process will involve the lender verifying your credit score, income, debts, and employment. The result is not merely a pre-qualification.
Rather, with pre-approved financing, both buyer and seller can have much higher confidence that financing will not be an issue in the transaction.
Be willing to help your agent write as “air-tight” an offer as you are comfortable with, including short contingency periods and minimal requests from the seller. Consider writing a personal letter, and perhaps provide a family photo to accompany an offer. If you write a letter, be watchful not to go overboard on emotional appeal or personal elements that sometimes can backfire.
If you’re seriously looking for more information on financing your first home, this article has a lot of valuable information.
DO: Be prepared to move fast or adjust your offer
Be prepared to make a quick and decisive decision if necessary, especially if multiple counter offers are issued by the seller which may increase the price. Be prepared for the possibility that the home may be in a price range where it becomes difficult for an appraiser to justify. In such a case, a buyer may need to make a larger down payment.
If there is not a rush to present an offer consider performing any and all property inspections before you write. This can work to your benefit if you think the property may have multiple offers. This can put you in a position where you are able to remove contingencies much quicker, which will make your offer much more appealing.
Consider improving the strength of your offer by offering to pay the seller a certain amount per day if there are any delays in closing on time. This could include reimbursement of all seller carrying costs for their own loan interest, property tax, and insurance costs.
Consider offering to pay some of the costs that sellers typically would have, such as retrofitting, escrow fees, title insurance, etc.
Be sure your agent finds out as much as possible what the seller’s agent and the seller themselves would prefer in an offer. Then have your offer written as close as possible to the seller’s specifications.
What Not to Do Before Buying a House: Buyer Don’ts
What should a buyer NOT do in order to increase their odds of succeeding in such a difficult market environment? There are many things to be considered and depending on your situation you may choose to take several of these approaches.
Remove contingencies too early
If asked by the seller to remove your financing contingency at the beginning before you have a lender fully process your loan, there may be a very serious risk in case something were to prevent your obtaining approval in time.
Are other backup buyers in play or entering the fray?
Be watchful of backup buyers that may enter the picture. While you will still control the escrow if your offer has been accepted if the seller has a better offer from a backup buyer they may refuse to comply with any request you make of them.
Do not assume that the seller will always issue a counteroffer to everyone who has presented an offer. At times an offer may be so clean and solid that the seller will simply decide to accept it or only issue a counteroffer to that party.
Stick to your criteria but forgive some maintenance or updating
Make every effort to maintain as clear a perspective of the “big picture” so you are not distracted or over-influenced by relatively minor issues. For example, major cosmetic repairs needed might amount to thousands of dollars but be very little as a percentage of the total purchase.
Similarly, if a home does not meet all of your criteria, and if you would not rank it a 10 on a scale from 1-to-10, compromise is usually called for. You may discover that 8 out of 10 is as good as it gets.
Give your Buyer’s Agent a chance
Give your agent a chance to perform and not hold her or him responsible for a shortage of homes available or unavoidable multiple offers. Buying your first home comes with its stresses and roadblocks, but loyalty to an agent is usually warranted unless the agent shows little understanding of your key criteria or fails more than once to identify an alternative that you definitely feel would have worked well for you.
Michael Edlen provides real estate counseling services to prospective buyers and sellers and has closed more than 1,450 sales.