Competition in the current housing market is tough. Mortgage rates are rising, prompting many potential buyers and property investors to purchase and/or refinance before rates get too high; housing starts are at a slow pace while available inventory is still low. Although these create a balancing effect because of limited affordability, many are still willing to take a risk just to realize their dreams of ownership.
If you are one of those looking to refi or purchaseand you want to survive the rush, you’re going to need all the help you can get. Use these tips to overcome the most common hurdles in today’s competitive housing market.
Establish an A-team
It’s easier to win a war if you have allies. Establish a good team of professionals who have the expert arsenal to help you emerge on top of the competition. From your real estate agent to your attorney and third party associates, make sure they have the skills and knowledge to attain the objective. Remember that you need people from the inside to know how things work. Professionals will help you understand the dynamics of the process and supply you with informed advice on what to do when faced with certain conditions and particular situations.
Working out your financing beforehand could be advantageous in more ways than one. For starters, it will give you a number from which to base your affordability limit. In addition, when you get your financing pre-approved, you will be able to demonstrate to the seller that your buying intent is more than just that – an intent. You have to show them that you are ready to lay down the money and that you have the means to do so.
When shopping for a property, always keep an eye on the properties surrounding your dwelling of interest. This will help you recognize a good deal when you see one.
Set your affordability range
Your buying power is limited by a few factors: a) how much money you are willing to pay for the down payment b) the appraisal value of the home c) the asking price and d) the maximum amount of financing. Based on these factors, you should be able to set your affordability range. If the price goes beyond it, prepare to gracefully let go and start finding another deal. Setting a range helps you evaluate your financial capacity and will avoid getting you into trouble in the future.
Enlist the help of your agent to determine a property’s price based on existing market conditions. Remember that if the sale price is beyond the appraised value, you will need to cover the difference from your own budget. Do you have that financial flexibility?
Be prepared for a bidding war. The timing is a crucial factor when it comes to making your offer. Before you make your bid, make sure your interest in the property is solid. Do not lowball unless the property hasn’t been in the market for a while. Lowballingmay discourage your seller and make him or her doubt of your sincerity. Respond to counteroffers promptly, preferably within 24 hours. However, do not be too eager. Learn how the seller handles the bids, and if there are deadlines for bid submissions. The pace at which the bid proceeds, and the limits with which it is set can help you strategize and focus more on your next move rather than proceeding for fear of losing to the other bidder(s).
What else to consider?
- Know who you are dealing with. If the seller keeps changing offers or renegotiating terms, something could be amiss. Sometimes, your intuition is a good compass in choosing the right deal. Walk away if things become too suspicious along the process.
- Waive your mortgage contingency when your rival is offering to pay in cash. This provides a relief to the seller who might be worried about your financing application being turned down.
Keep your spirits up
If you lose the bid, move on. Never let one failure discourage you from pushing onwards. Who knows, you might end up with a better deal than the one you lost to?