The real estate industry has been through its ups and downs, but real estate housing market success are much more stable and profitable than other investments. The real estate housing market has a solid grounding and offers a lot of potential with its increased number of sellers and buyers every year. However, the state of the housing market decides when it is the best time for buying and selling a house. Because of the highly competitive nature of the housing markets, along with rising mortgage rates, buying a home can be a difficult process.
From the latest 2022 real estate housing market predictions, we have seen a 53.7% increase in the monthly mortgage payment rates. This ultimately means that to buy a home in this competitive market, you will need some tips through which you can navigate the market and succeed in becoming a first-time home buyer. Before going through these tips, it is important first to grasp what a seller’s market is and how it can prove a challenge or a benefit for you.
About Real Estate Housing Market
A real estate housing market can be neutral, a seller’s, or a buyer’s. A buyer’s market in real estate is one with more properties and fewer interested buyers. A neutral housing market has a normal inventory with comparable sale prices almost equal to the listing prices.
However, considering buyers’ perspectives, it is important to understand a seller’s market. A seller’s housing market has plenty of buyers looking for an opportunity to purchase a property from a limited pool of houses. The listing prices are high, and you might have to pay more than the asking price. Properties get sold within days. This, in turn, leads to fierce competition between the buyers, where the best offer with the best behaviors wins.
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8 Crucial Tips for Real Estate Housing Market Success for Buyers
We have compiled some tips to help you secure your position as a buyer in this fierce real estate market.
Get a Pre-approval for the Mortgage
The first and probably the most crucial thing to do before you even commence your house hunting is to get a pre-approval letter from the lender on your mortgage. Remember that getting pre-approved and pre-qualified are two different things. Pre-qualification does not require a lender’s approval; it is based on the information you provide. Pre-approval includes income, credit score, and other verifications from a lender to give you an idea of your affordability to buying a new place.
So how else does a pre-approval help you with buying a property?
When the housing market is neutral, you don’t necessarily need pre-approval, as you will have enough time to sit through the process and wait for the approval. However, in the case of a seller’s market, you will not get much time. Because, on average, the closing time of property in a seller’s market is between 42 to 46 days. The lesser this period is, the more likely you are to close the deal in competition with other buyers.
The pre-approval enhances your chance of getting the home of your choice and can also speed up the whole process of closing the deal. Another important aspect here is that some realtors will not prefer working with you if you do not have mortgage pre-approval. The sellers will also avoid such buyers who have gotten approval from their lender beforehand.
Look for the Best Real Estate Agent in the Market
You will need a great real estate agent to help you out through the process of buying a house in a competitive market. They are invaluable and have great connections with other people in real estate. The best option is to hire a realtor who has specialized in your targeted area. In this way, they will have an inside knowledge of that local market which can help set the offer.
To find a good realtor, you can either start online by reading their reviews and checking their testimonials. Most agents use social media management packages, so it’s important you find as many good testimonials as possible. Another way to find a good agent is by consulting your close friends or family members.
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Develop Connections in the Real Estate Market
The real estate market runs on connections. Stay in contact with different people in the market. It will reflect that you are a serious buyer. Additionally, you will be able to maintain a good position in the market. So, by doing detailed research, you will get to know the market trends and stay updated about recent property listings. Furthermore, it will give you an idea of FSBO properties in good neighborhoods, which are not entirely a bad option.
Broaden your Search Area and Criteria for House Hunting
In a seller’s real estate housing market, it isn’t easy to find the home you have in mind since many buyers are in line already. Your best option is to broaden the house-hunting search area, improving your chances of success. Keep your wish list open and re-prioritize the opportunities if you find an affordable one in a different location. If you stay fixed on a certain locality almost out of your reach, you will miss out on other great opportunities. Try stepping out of that ideal location. And there is a good chance that you will find a home with better square footage and a better price.
Be Financially Flexible in the Seller’s Market
According to the National Association of Realtors (NAR) data in 2021, around 29 percent of the properties were sold above their asking price. So, it’s better to stay familiar with the market’s competitive nature and prepare your budget accordingly. In addition to making an offer above the asking price, there are other things you can do to make your offer stand out amongst the offers of interested buyers. Try building a good relationship with the seller by sending them personal/appreciation letters and discussing why you are interested in their property, etc.
But sometimes, one cannot afford to make a huge offer. In that case, some indirect ways of convincing your seller mostly revolve around your behavior as a buyer.
Tips to Make your Offer Stand Out in case of a Fixed Budget
Having a good realtor by your side is one thing that can be of help to you in a seller’s market. However, other aspects can save you from paying too much over your budget and secure your financing.
Avoid asking favors – Don’t ask any favors from the seller, like letting you have that piece of furniture because it suits the living room.
Don’t offer less than the asking price – In case your budget does not allow you to make a huge offer, at least reach the asking price figure. Avoid making an offer lesser than the listing price, or you will quickly get screened out.
Large Earnest Money Deposit – Earnest money is the deposit you give to the seller after submitting an offer. After consulting with your agent and weighing your financial options, see that you give the seller a large earnest money deposit. Not only will it leave a good impression, but the seller will also make your offer a preference.
Submit the Required Documents – Keep your pre-approval letter ready, set the date as the day you are making the offer, and match it to the property’s sales price.
Stall Buyer’s Possession – An attractive offer isn’t always the highest. The seller prefers the offers that best serve their leisure, so you have to be flexible. Consider giving them a few more days till the closing and assist them with managing minor inspection items or moving out.
Try to be Selective
No matter the real estate housing market state, you must be selective in your choices. This does not mean you must settle for whatever first option you find. But the goal here is to keep a general idea of the kind of home you would like to own. Otherwise, you will only be overwhelmed by the choices a realtor offers you. They keep an updated list of properties on the market or sold. Once you are selective in your demands, reaching your goal of becoming a homeowner wouldn’t be that difficult.
An important factor that helps you stay selective has a fixed budget. Start by looking for homes that are a bit below your budget. This way you can make an offer at the asking price and deal efficiently with the contingencies and closing costs on time. Whatever helps you get ahead of other buyers is your way to real estate housing market success.
Act Quickly or Be Patient? Both.
When it comes to a competitive or hot market, you cannot afford to waste time. If there is a property in your mind already, you must act quickly in making an offer. Ask your agent to notify you whenever a good property gets listed. Stay connected with real estate housing market websites like Trulia, Zillow, or Realtor.com for quick updates. Keep the negotiation strategies ready in case your targeted property has a multiple-offer situation. An escalation clause will put you ahead in the game, but you must know when to pause. This is where being patient comes in handy.
Biding wars for property has become a norm. As a buyer, you must remind yourself that even if the first offer does not lead to a successful home purchase, the next one will. You have to stay patient. There will probably be a long time before you find the right home with the right offer for your needs. If you make rushed decisions and try to go beyond your budget, you might have to face negative consequences. It will ultimately lead to a long-term financial crisis –one you cannot easily recover from. Another important aspect when dealing with purchasing a home with patience is how you behave with the seller.
Your Behavior as a Buyer
Most sellers do not favor dragging the whole process of selling, so it is up to you to make this process easier for them. Make sure to:
- Offer the seller a rent-back agreement. A rent-back agreement lets the seller stay on rent for a while after closing the deal. If the seller does not have an immediate place to stay, this can be an advantageous option for them.
- Yes, your realtor will stay in touch with the seller, but that does not exclude you entirely from the picture. So, please don’t be scared of building a connection with them. What’s better is to ensure a continuous communication flow between you two. This way you can stay updated about the whole process.
- Try to schedule a home inspection as early as you can.
- A good real estate agent will perform a key role in keeping things smooth between you and the seller. A realtor’s prior real estate marketing Packages can be of great help to you. They know a seller’s priorities, and this prior knowledge will help you a great deal in putting together a good offer.
Wrap-Up – Are you ready for this bumpy ride?
Yes, the real estate housing market is getting competitive. But it does not mean that there are no chances of success for you in becoming a homeowner. To make your offer attractive and stand out in a hot market, you must follow the above-mentioned tactics. But there are no shortcuts in this process. Buying a home for the first time is time-consuming and a bit of a bumpy ride. There is a fair chance you will miss out on a few deals initially. But with time, you will learn to make a better offer next time a good offer makes its way to you.