How to avoid the most common pitfalls in a hot market and land the home of your dreams.
With record-low interest rates, home prices going up for 50 straight months, and a lower housing inventory than a year ago, the housing market across the U.S. is hot, hot, hot. This means buyers are competing in tight "seller's markets," often facing bidding wars, multiple offers, and cash buyers.
It's not an easy time to be a home buyer. But buying your dream home in a seller's market is possible if you're able to avoid these common mistakes.
Not getting pre-approved for your mortgage loan.
Don't even think about shopping in a hot market "just to look." Because odds are you'll find something you fall in love with and have to scramble to make an offer or even enter a bidding war—without even knowing if you can in fact afford the property in question. Most Realtors these days won't work with a buyer who is not at least pre-qualified for a loan (which is more of a formal estimate), but a pre-approval has more teeth and is a guarantee of what a lender is willing to loan.
Getting pre-approved for a loan is a critical step in the buying process, and involves working with a lender to present your financial picture in order for them to determine how much of a home loan you can afford.
Many lenders offer easy online access to get you started with the application process. You will typically need to provide proof of income, information about your overall debt load, and your lender will help you secure a credit report. Once this information is gathered, your lender will quickly be able to tell you the amount of money you are approved to borrow and provide a letter confirming this, which you can include with your offer to reassure the seller that your offer is solid and attractive.
Not having a thorough understanding of the market.
This is essential, particularly if you are relocating because no one housing market is the same.
Understanding the basic factors, forces, and principles that shape the area economy is essential, as is understanding the types of properties that are more desirable or scarce,
understanding the various parts of town or neighborhoods, and having a general sense of the listings, sales data and market's overall trajectory.
This is where a knowledgeable Realtor (in particular a buyer's agent) can be a real asset in your search. The more you know, the more quickly you'll be able to focus only on properties that are a true fit, making you more likely to recognize your dream home and jump on it when the opportunity appears.
Not having up-to-the-minute search tools.
With homes flying off the market within days or even hours, it's critical to have the most sophisticated search tools to access the MLS.
Despite having the internet at your fingertips, most buyers can't compete with professional tools. Zillow and Trulia are NOT the tools to rely on in a hot and fast-moving market—these sites aggregate information from multiple sources including the MLS, and it can take anywhere from 2 hours to a day or more for updates and new listings to appear.
Not submitting a "friendly" offer.
A seller's market is not the time to bargain shop or play hardball, unfortunately. That means no lowball offers just to "see what you can get," no contingencies, and no rigid demands such as a long closing process or protracted deadlines. The friendlier your offer, the more likely it is to be selected.
Although it can be stressful, navigating a seller's market is possible, and there will always be people needing to sell their homes, no matter how tight the inventory may seem. With a little patience, the right tools, and a willingness to do your homework and be flexible, you can land your dream home.