The current real estate market has led to frustration and anxiety for many potential buyers. Having good credit scores, enough funds for a down payment, and adequate loan pre-approval is often not enough for them to find their dream home.
How much mortgage payment can I afford?
Agents often coach their buyers’ clients to write nice letters to the seller or include a family photo to try to add more of a human touch in an effort to stand out favorably. These extra ingredients rarely seem to tilt the scale in their direction however, as they are out-bid by all-cash investors or much more committed “owner-users”.
How to Compete as a Buyer in Today’s Real Estate Market
Seasoned agents in the business for 30+ years are often baffled by the challenge of how to counsel a buyer trying to compete in today’s environment. If they base their advice on the theoretical actual value, they are often surprised at how much higher someone else is willing to offer. Builders have frequently, not only offered the highest price but also include attractive terms such as letting the seller retain possession for many weeks after the escrow has closed.
Get Fully Approved Before Writing an Offer
As most prospective buyers need to obtain a loan to make the purchase, it is imperative that they make every effort to get fully approved for a loan before writing an offer. The real cost to a buyer may be considered as the monthly payments needed to service the loan, rather than just the purchase price itself. As long as interest rates remain around the near-historic low level, buyers can still afford to pay a higher price than they will when interested begin to increase. As the cost of money increases even by only one percent, the actual carrying costs to own the house could increase by as much as 20-25%!
Non-Negotiables & Deal Breakers
The combination of increasing cost of money in addition to higher prices may result in many potential buyers remaining in leases or neighborhoods they would prefer to be moving out of. This is the risk if a buyer does not succeed in a purchase by waiting or making offers that are not high enough.
Frequently, we notice that home seekers are not as willing to compromise in their search criteria as much as was seen in all previous strong markets. They gradually find ways to pay a bit more after many months of attempts to purchase. However, often they still fall short by 3-10% from what it would take to outbid others.
Conduct Multiple Buyers Consultations
It may be worth having thorough consultations with a loan broker, their accountant, as well as their real estate agent to explore the various alternatives and take into consideration both the short and long-term potential costs involved.
Michael Edlen has been involved in nearly 3,000 contract negotiations and counseled nearly 500 buyers in their successful purchases of homes. Having been ranked among the top 100 agents in the country, he and his team are available for buyer consultation appointments and may be helpful to buyers achieving their goal.