It's easy to make costly mistakes as a Buyer searching for a home in a Seller’s Market. To avoid these mistakes, you will need a plan – a concrete one. Creating a plan isn’t that hard. Following the steps below will make things fairly easy.
Always start with a strong offer
We all want to get the best house possible but for the least amount of money. For this reason, most prospective home buyers upon seeing the asking price of a new home start thinking of how to bring the price down. Don’t get me wrong; there is absolutely nothing wrong with making an offer lower than its asking price. This strategy is particularly useful if the house isn’t actually worth the asking price or if there are several houses on the market. However, looking to get a great deal in a seller’s market is to a large extent counterintuitive. Many buyers will miss a chance at their dream home because they do not start out with a strong offer. Additionally, the competition in a seller’s market is really fierce due to low inventory. The best thing you can do as a buyer is to start with a solid offer.
Avoid starting with a small down payment
To increase your chances of landing a good house offer, you will have to commit to a larger down payment. Do remember that others will be competing with you, so your offer has to stand out. Making a larger down payment not only makes your offer attractive but also increases your chances of securing a mortgage. Of course, it is left up to you to decide how much you are willing and able to put down, but as a golden rule, the more the better. Your end goal is to make your offer attractive, and it's up to you to decide which strategy is best.
Avoid spending so much time analyzing the purchase price
Some buyers make the classic mistake of burning up time analyzing the purchase price of a home. Not only will you end up wasting much time, but your chances of getting that beautiful home become narrowed. Provided the home fits your taste, is located well for you and fits your budget, go for it – you will be glad you did. Secondly, ensure your financing is available so that the moment you find a good home, you can instantly go for it. Don’t forget to check if the house has any repair issues.
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Never work with an agent with too little experience
Things can get overwhelming in a seller’s market, and often do. You are better off working with a seasoned Real Estate Agent than wading through it yourself. One good thing about working with a Real Estate Agent is that it is the seller, not you, that will pay the Realtor. Always be prepared to jump in with an offer when a seller’s market becomes especially competitive. An experienced Realtor understands the nitty-gritties of a seller’s market, and can help save you much headache and stress.
First get a preapproval for a loan
When you apply for a mortgage, the steadiness of your income will be determined first, but it doesn’t end there. Your credit score and debt-to-income ratio will also be evaluated — and the better they are, the better your chances of securing a loan. Remember when we talked about making your offer attractive? Securing a preapproval for a loan is part of that. No seller will want to deal with you if you don't have the cash to pay and you haven’t secured a loan yet. Failure to secure a preapproval says to the seller that you are just not a serious buyer. Don't start by finding the lender though; begin by selecting the most important player for your home buying team — your buyer's agent (real estate agent).
Securing a preapproval is a good way to prove to a buyer that you have done your homework regarding your finances because it requires submitting your financial documents for evaluation. And — as important as securing a preapproval is — it can also be important you secure it from a lender with a strong track record.
Always be prepared for a bidding war
You will be setting yourself up for a rude shock if you enter a seller’s market without being prepared for a bidding war. So many buyers have found themselves in this messy situation, and the reason is understandable. Getting involved in a bidding war puts you at risk of blowing your budget, but as every experienced broker will advise, always start at a price far below your max budget – you could be in for a bidding war — and you wouldn’t want to get caught up in a war you can't fight and win.
Always learn from your mistakes
Nothing good comes easily – especially getting a good home. There will be times when your offer will be turned down, and that’s not a bad thing. It only becomes bad when they are turned down time and time again. Whenever you lose a deal, learn all you can and then move on. Be prepared to make loads of mistakes when buying your first home. What really matters is learning as much as you can from your mistakes and then moving on.
Always outline your offer
Some buyers make the mistake of failing to outline their offer, and the consequences are always dire. To avoid this mistake, always list out all the benefits your offer has to offer. If you lack the skills to do it, have a Real Estate Agent do it for you. Your goal is to lure in the seller using the benefits that come with your offer.