One thing about the housing market is that it constantly evolves. Sometimes, there are more sellers and not enough buyers. And sometimes, there are too many buyers and not enough home inventory. When it’s the latter case, homebuyers often find themselves competing with each other for the same home, which drives home prices higher.
Such a scenario can be extremely frustrating, especially for first-time homebuyers who may fall in love with their dream home only to get their heart broken when they lose it to another buyer. Fortunately, there are some fairly simple strategies to turn the odds in your favor.
Always plan ahead.
You’ve probably heard the old saying, failure to plan is a plan to fail. Nowhere is this truer than in a tight housing market.
Put yourself in the shoes of the average home seller in a tight market, who is entertaining several offers to purchase their home. Which offer are they likely to pick? Logic may say it’s the higher offer, but that’s not always so. Unless the higher offer is all cash, they are more likely to choose the best offer with the strongest chances of closing.
This means you should always get a loan preapproval before you start looking at homes. A preapproval tells potential sellers that your lender has verified your income, savings, credit, and that you are a serious buyer.
In a tight housing market, you can do all the preparation in the world and still not land the home you really want. There may always be someone with a stronger offer, and your lender will not lend more money than the home you want is worth, which means you’ll have to come up with the rest. If you can’t, you’ll have to move on.
If you’re committed to buying a home, you accept market conditions and persevere. It also helps to be flexible. You may want a three-bedroom home with hardwood floors, a den, a dedicated office space, and a view, but perhaps you could compromise on one of these things. Perhaps you can add hardwood floors later or get that nicer view on your next home. By being flexible, you’ll give yourself more options.
Because so many homes are generating multiple offers, homebuyers can expect to take weeks or months to find a home and get your offer accepted. If you’re committed to buying a home, don’t worry when your first offer doesn’t get accepted.
This means not overbidding on your next purchase offer just to get your offer accepted. Doing so can leave you “house poor,” which happens when you spend too much of your total income and savings on buying a home. This can leave you short on cash when an emergency expense arises, like a medical issue or home repairs. Even if you get the home you want, you may find yourself in financial trouble down the road.
Offer some peace of mind.
A tight market is usually a seller’s market, which means sellers aren’t terribly worried about selling their home. What they do care about is a smooth, on-time closing.
Getting preapproved definitely helps. But you may also want to find a lender that provides a guarantee that your loan will close on time. For example, Right By You Mortgage offers an On-Time Mortgage Closing Guarantee, which pays both a homebuyer and the home seller $500 if the buyer’s loan doesn’t close on time. Having such a guarantee can instantly elevate your offer in the eyes of a home seller.
Have more questions about buying a home in a tight market? The local loan experts at Right By You Mortgage would be happy to help. Just give us a call at 877-552-2242 or reach out to us at firstname.lastname@example.org today.