Competing For a Home
How to Compete in a Sellers Market
Competing for a home with sales prices well over appraised value, and inventory levels far below demand, you must prepare for the battle! Home prices jumped up over 10 percent from the end of 2019 to the end of 2020. A survey from the Federal Housing Finance Agency showed prices increased in all metro areas across the US.
The current low mortgage rates have created increased demand while low inventory exacerbates the bidding wars. Finding a home you like in 2021 is only the beginning of the battle. Competing against other buyers, including institutional buyers presents the uphill portion.
Understand Your Market Condition
You know that in the current environment that you must act quickly without jumping in too fast. Unless you know your market, acting out of panic can be dangerous. You may end up with the wrong property and pay too much on top of that. It is important to take some time to shop a bit more to avoid buyers remorse. Check comparable home sales closely and be discerning in your selection. Look at a number of homes to get a feel for where you will be better off on price and value.
Check out the area near the most popular areas and consider how values in those areas may increase over time. Compare homes available by price per square foot and against recent sale prices on the same basis. Include a factor for age and condition to begin seeing the actual values more clearly.
Consider the neighborhood, schools, shopping and ease of access as these will grow in importance once you settle in.
Be Prepared to Pay a Premium
In a more traditional market, asking price was usually a bit more than the seller really expected to receive. In this current buyers market, homes are selling for 5 to 20 per cent more than asking price. There are reports that show these increased prices are making it very hard for VA loan buyers and first time buyers. This is primarily due to requirements on those mortgage types. It is also true that institutional buyers are paying cash and closely quickly. This adds to the difficulty in competing for a home with many buyers. Always set your personal limit on how much over asking you are willing to pay.
It is no longer easy to gain concessions from sellers as they are aware of their new power. Many offers include waiving the appraisal and asking for no conditions at all. With cash buyers not using mortgage lenders, even inspections can be waived and price to appraisal is no consideration. Be cautious about waiving an inspection. You can find yourself with major repair issues if your not careful.
Obtain a Pre-Approval
Without a doubt, buyers should have a pre approval before competing for a home or making any offer. The pre approval tells the seller that you’re a prepared and serious buyer. It would also be wise to ask for approval for an additional amount in advance of your offer. If you are able to obtain your pre approval this way, it gives you a better hand to play as you proceed.
Finally, it is always wise to seek out a qualified professional agent to help you find and buy your dream home. If you have not found that perfect agent, call Penney Mullins to enlist one of the best in business. You can contact her here.