This year has certainly been frustrating for buyers. There is very little available on the market and homes that are priced appropriately for their location, size and condition are off the market as fast as they come on. It can seem like a hopeless race with too many hurdles at times but, as I tell my buyer clients, you only have to find one home. Despite all evidence to the contrary, the right one will come along so the best thing you can do is make sure you are absolutely prepared when the opportunity presents itself.
So, What Steps Can A Buyer Take To Prepare To Be Successful In A Seller’s Market?
FINANCING FIRST! I cannot stress enough the importance of getting your financing ducks in a row BEFORE going shopping for a home. It’s critical that you understand how a lender is going to look at your income and debt (which may well be different than the way you look at it) because that will impact how much of a loan you can obtain which, of course, will impact what price house you can buy. There is nothing worse than falling in love with a $350,000 home only to find out you can only afford a $325,0000 home. In a seller’s market that is an insurmountable difference.
The other critical reason for financing first is that if you do fall in love with a house that is in your price range, the seller will not consider an offer if you cannot show that you are qualified to purchase it. And, considering the market, if you start the financing process AFTER you find THE house, there is a very good chance it would be gone before you could go to a lender, provide that lender with all the necessary documentation and obtain a valid financing letter.
Become Educated Regarding The Market Area You Are Interested In. Location, Location, Location is more than just an old saying, it has meaning. You could take the same house and move it to different towns and it would sell for a different price. Also within a given a town the same house would sell for a different price depending upon its location within the town…cul de sac neighborhood vs main street, for instance… so you need to become acquainted with what your dollar will buy in the area you want to be in.
Set Realistic Expectations. Once you understand what your dollar will buy, you can go through your fantasy list of wants…at least 3,000 s.f., 4 bedrooms, 3.5 baths, finished lower level, brand new kitchen with granite counter tops, hardwood floors, 3 car garage and determine which of those wants are attainable, given your budget, and which need to be adjusted.
Make Yourself Available. In a hot market, there is a good chance the home of your dreams will not be available long. Reconcile yourself to the fact that your home search may not always be convenient. Actually, do yourself a favor, reconcile yourself to the fact that your home search WILL BE inconvenient.
Make A Strong, CLEAN Offer. A seller’s market is not the time to lowball! If you find THE home, make a strong offer right out of the gate. DO NOT ASK FOR MONEY BACK TOWARD CLOSING COSTS UNLESS YOU REALLY NEED IT AND DON’T CLUTTER UP YOUR OFFER WITH A LAUNDRY LIST OF PERSONAL ITEMS YOU WANT (that will create a problem with your financing anyway)
Understand That There Is More To An Offer Than Price. The sellers and their agent will be looking at your qualifications (financing first!), how much you are putting down, the terms of any contingencies – home inspection, financing – you need to strike a balance between so long it won’t appeal to seller and so short it is not do-able, what you are asking for (do yourself a favor – DO NOT ASK FOR things the sellers specifically excluded), whether or not you need money back toward closing costs (do not ask for it unless you really need it).
Understand That The Seller Is Not Tied To You Just Because You Have Made An Offer And You Are “Negotiating” With Them. A common buyer misconception is that once an offer has been made in writing and the seller has responded (either verbally or via email) that the seller is now tied to them until they “finish negotiating”. That is not true. Until all terms have been completely agreed to and all parties have signed the contract, the seller is free to take another offer. So, don’t mess around. Make your best offer right out of the gate. You may not have another chance.
Understand The Purpose Of A Home Inspection. The purpose of a home inspection is to uncover serious defects to the structure and systems of the house that were previously unknown to the buyer. I bring this up because some buyers are under the misperception that the home inspection is an opportunity to renegotiate the agreed upon sale price. If something that is serious and was previously unknown is uncovered, then certainly, the sale price might be renegotiated or the seller might agree to fix it but if the item was previously disclosed or is typical for the age of the house, the seller will most likely not agree and then the buyer will either have to accept that or will have to withdraw and will have lost the money they spent on their home inspection. So, make your offer based upon any already disclosed items.
Do Not Get Caught Up In A Bidding War And Go Over Your Maximum Comfort Level. It goes without saying that you should not offer more than you are approved for. You should also not offer more than you're truly comfortable with, regardless of whether you're approved for that amount. Only you know what your best offer is. It may be asking price, higher than asking or lower than asking. Your best offer is the offer that you will be comfortable with if accepted and, even more importantly, it is the offer that you will be comfortable with if it is not accepted. There is nothing worse than discovering what a property you bid on sold for and realizing you would have been happy if you bought the house for that price.
DO NOT GET DISCOURAGED AND DO NOT GIVE UP! If you get your financing in line, do your market research so your expections are realistic and make YOUR best offer right out of the gate, you can be successful!
For help successfully purchasing in Southern New Hampshire's Seller's Market, you can contact me at 603-490-5344.