HOW TO BUY A HOME IN A TIGHT REAL ESTATE MARKET
How to buy a home in a tight real estate market.
|The real estate market in Southern California, as in other parts of the nation, can shift back and forth between a buyer's market to a seller's market. During a seller's market, multiple offers and surging prices may be good for sellers. But what if you're a buyer trying to find a home when there's hardly anything for sale? It can be frustrating to say the least. Here are some things you can do to increase your odds of finding and buying the right home.
1. Get your finances in order. When the inventory of homes for sale is low, you can be sure that other buyers will be looking for the same house you are. So, when the right home comes on the market you have to be prepared to jump immediately and make a strong offer. It's crucial to have all the financial work completed up front.
Get your down payment in hand so you can close quickly if necessary. Make a loan application and get pre-approved for a mortgage. When your real estate agent presents your offer with an pre-approval letter from your lender, you'll have a solid advantage over other buyers.
Even though 95 percent loans are common, the transactions are riskier. That's why sellers and listing agents are skeptical of buyers who put down less than 10 percent. If there are multiple offers, 95 percent buyers will always lose. So make arrangements to show the ability to put down at least 10 percent, even though you may ultimately put down only 5 percent.
2. Commit to an experienced real estate agent. Find an active, real estate professional who specializes in the area where you want to buy. In a fast-paced market, many homes sell before they hit the MLS. Many sales today occur because the agent brings buyers and sellers together on unlisted properties.
You're at a real disadvantage if you work with an out-of-area agent. Such agents may not hear about new listings until offers have already been written on them. You need to work with someone who will call you about new listings before the public learns about them. Use Neal Hribar's 17 important questions as a guide to finding a real estate agent.
3. Know what your priorities are in a home. Carefully analyze your requirements for a home. Write down what you want and need and put the essential features at the top of the list. Seeing a number of homes will help you determine your housing requirements. No home is perfect and it's unrealistic to expect to find all the features you desire in one property. You'll have to compromise.
4. Review your priorities from time to time. If you can't find the right home in 30 days, take another look at your priority list. You may have to consider different ideas. For example, if you passed on a home you liked because it needed new paint and carpet, take another look at it. Buyers who are willing to make cosmetic improvements increase their odds of buying a home in a tight market.
Be open to looking at the inside of homes that are unappealing from the outside or are different styles than you had in mind. Buyers who will consider more than one architectural style increase their options. Look at homes in a different location. Sometimes going just a few miles to an adjacent community opens up a whole new selection of homes for sale, often at better prices.
5. Research expired listings and "for sale by owners." Ask your real estate agent to check on expired listings to see if there's one that might work for you. An expired listing is one that did not sell during the listing period. Sometimes sellers of expired listings take a break from being on the market. They still want to sell and they plan on going back on the market again. This happens frequently over the holidays and during bad weather.
Drive through the neighborhood you desire and scour the classified ads to locate "for sale by owners." Even though it's difficult for owners to sell their own home, some put up a sign and advertise for a few weeks before listing their home for sale with a real estate agent. These sellers will usually allow your agent to show their home on a "one-party showing."
6. When you find the right home, act quickly. A well-priced property in good condition will draw many interested buyers the first few days on the market. So, when you find the right home, sign an offer right away and get it presented immediately. If you have to think about it overnight, you may as well forget about it, because it will be gone. Out-of-town buyers, or those who have to travel, are at a real disadvantage. They take the chance of missing out on the right home every time they leave town. To prevent frustration and disappointment, make sure that a close friend or family member knows exactly what you're looking for in a home. Then, if the right property comes on the market when you're out of town, someone can view it, describe it to you on the phone and if it sounds right you can make the offer by fax or e-mail.
7. Make your offer as clean as possible. When you write up your purchase agreement, include as few contingencies as possible. You want the offer to excite the seller and the listing agent and still protect yourself. If you own another home and need to sell it, list it and get it sold now. No seller will take a contingency in today's fast-paced market. Review a blank copy of the purchase agreement ahead of time, so you'll be familiar with the forms. Interview home inspectors and decide whom you want to use. Then, you'll be ready to complete the physical inspection within a few days of acceptance. Make the contingency time periods short. The sellers and their agent will be impressed and you will find yourself a homeowner!
SUMMARY: In a busy real estate market you can't afford not to own a home. The more flexible you are in your search criteria, the easier it will be to find a suitable home. If you're not able to find exactly what you want, be prepared to compromise. A good real estate agent will challenge your priorities occasionally to see if they have changed. If you're not finding the ideal home, choose one that comes closest to meeting your needs and buy it with the idea of moving in a few years. Just be sure you buy a home that will be easy to resell, when the time comes.
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