Homeownership

How to compete when buying a home

Whether the market’s hot or not, it pays to be a competitive home shopper.

Table of contents:

 

Regardless of whether you’re trying to buy a house in a hot seller’s market or taking advantage of a buyer’s market, there are a lot of good reasons to make your home shopping as efficient and competitive as possible. The process of buying a home can be time-consuming and overwhelming, but smart buyers keep these tips in mind to be competitive.

Before you start

1. Establish a budget and stick with it

If it’s a seller’s market, accept the fact that you may need to make an offer that is over the asking price, which means you need to consider houses with list prices under your limit.

 

2. Develop a clear list of criteria

Separate ‘must have’ versus ‘nice to have' features. This includes everything from location or number of bedrooms and bathrooms to move-in readiness. Understand that you may not be able to find everything you want at a price that fits your budget.

 

3. Do your homework

Drive around neighborhoods to get a feel for the areas you want to target; you can also use Google Earth to get a bird’s eye view of the area and even drive around virtually. Also, look to see how long homes sit on the market in your target area. If listings move to ‘pending’ right away, know that you’ll need to make quick decisions if you want to compete. If houses sit on the market for a while, you may be able to negotiate below the asking price.

 

4. Choose an experienced realtor

Listen carefully to what they have to say. If you’ve made several unsuccessful offers, you may need to strategize and change your approach. While this is no doubt an emotional process for you, trust the professional opinions of your realtor to stay on track.

 

5. Have your financing ready to go

Your offer will be more attractive to a seller if they don’t have to worry about your financing delaying the process. Pre-qualification works, but a pre-approval is much better, especially in competitive situations.

Making your offer

1. Look for ways to help your offer stand out

Be creative. Consider paying closing costs or other seller fees to make your offer look more attractive. Think about offering a short close; offer to pay their moving costs or allow the sellers to remain in the home for a month or so after closing.

 

2. Limit the contingencies in your offer

Show flexibility where possible. However, think twice before waiving an appraisal or home inspection. You take on extra risk when you forego these two.

 

3. Offer an earnest money deposit

Earnest money shows that you’re a serious buyer. Typically, this deposit totals 1 to 3% of the home’s asking price, but it can be any amount you wish. However, make sure you want to really buy the home before offering this because if you don’t go through with the purchase, you could lose this deposit.

 

4. Avoid the temptation to get into a bidding war

Instead, consider adding an escalation clause that says you will outbid competing offers up to a certain maximum. For example, if you offer $500,000 for a home, you could include a clause in your offer that says you will pay $5,000 over the highest competing offer, up to a maximum of $525,000. Just make sure that the clause doesn’t push you over your budget.

 

5. Make a competitive, fair offer

Unjustifiable low-ball offers show that you’re only fishing for a deal and not serious; it also wastes your realtor’s time.

Final thoughts

To be a competitive home buyer, you need to be creative, persistent, and patient. It’s not unusual for buyers to search for up to a year for the right house, even in down markets. During this period, you may look at a LOT of homes, even put in offers on several, and still not be successful. But don’t get discouraged. Trust in the process and know that you will eventually find the home that makes the most sense for you.

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The home loan experts at Alaska USA Mortgage Company have helped thousands of people win the home of their dreams in a competitive market. Schedule a meeting with an expert near you.

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