The idea is to get a handle on the local market without the pressure of feeling like you need to make an offer.
By Cody Lee
If you can, spend some time looking over what’s available before you get serious. Scan your favorite real estate website for new listings every day. www.Ebby.com has one of the best and most accurate searches in the market. Tour open houses, but don’t fall in love at first sight! The odds of that home still being available once you are ready is very slim. I know, it’s easier said than done.
The idea is to get a handle on the local market without the pressure of feeling like you need to make an offer. You’ll also learn more about the kinds of homes and neighborhoods you like, or don’t, and which features matter to you.
Get a good real estate agent
Having a good agent is particularly important in a hot market. You want someone who hears about listings as soon as they hit the market, or before. Also, a good agent knows how to make your offer stand out.
Good buyer’s agents have a track record of winning more than half of their offers. They keep track of a changing repertoire of tips and techniques, and have built up relationships with listing agents.
Two-thirds of homebuyers say that the real estate agent they used is a “friend”. It is very important to use a reputable and knowledgeable realtor. A “friend” is not always the best option when it comes to making one of the largest purchases of your life. Ask multiple people with unbiased opinions. The best realtors will always come up.
Get your financing lined up
Talk with a few lenders or mortgage officers. Good Faith Estimates will help you compare interest rates and costs, but in a hot market, you’re also looking for someone with a reputation for closing loans quickly, and delivering on promises. It doesn’t hurt to go ahead and get pre-qualified with your lender enabling you to act quickly when you find a home you like.
Be aggressive and don’t play hardball
To succeed in a hot market, you have to make house hunting a priority – not just something you fit in here and there on weekends. Also, be prepared to make an offer on the spot, assuming you’ve already taken care of your financing. (See above)
In a typical home-selling scenario, buyers make an offer below the asking price, then negotiate upward from there. But in a hot market there is little to no room for negotiations so don’t waste your time lowballing a seller. At the same time, you don’t want to blow your budget to smithereens. It must be a decision that you feel very comfortable making. Bid strong, but don’t overextend yourself, financially.
Offer a quick closing
Some sellers are in a hurry. Find out what the standard closing time is and see if you can put in an offer that would close more quickly. This might be a tiebreaker in your favor. Sellers might even accept a slightly lower offer to get the deal done fast. Sometimes, using a lender that has an established relationship with your real estate agent can help ensure a quick closing.
Waive other contingencies
In a hot market it is very difficult to get an offer accepted that’s subject to selling another home. If you do have to have your home sold before you can purchase, it is always better for the house to be under contract or at least listed prior to submitting an offer on a purchase.
If you are getting a mortgage and your financial position is really strong, you can waive the financing contingency. But you should be very aware that this means if you’re financing falls through, you will lose your earnest money. You want to be careful about waiving contingencies because they exist to protect your rights, and your money.
Widen your search and decide where you can compromise
In hot markets, it’s not unusual to feel outpriced in your favorite neighborhood. But that may merely mean you need to start scouting farther out – say, in an up-and-coming neighborhood, nearby.
Some buyers see a dated kitchen and run for the door. That’s less competition for you. Finishes and appliances are easy to change. Also, finishes and architectural styles go in and out of fashion. Midcentury modern, for instance, was hot in 2015, after decades as a niche interest. Granite countertops are giving way to other materials.
Sometimes properties sit, even in a hot market, because of a problem that is scaring other buyers away. Yet those “flaws” (e.g. an extra five minute drive from school or some renovation work that needs to be done) might not be such a big deal to you. While such houses may not be ideal for all, finding a house this way might lead you to getting a better deal.
Finally… be patient
The typical homebuyer in 2016 searched for 10 weeks and looked at 10 homes, according to the National Association of Realtors. In a hot market, a buyer might make 10 offers before winning one. After losing out on several homes, you might feel tempted to make a desperation bid or give up. Don’t do either.
Bidding too much or making an offer on a home you don’t really like will leave you resentful. You might be better off not getting a house.
If your search extends into the fall and winter, you may find the competition lets up, although there also tends to be fewer homes for sale these times of year.
Meanwhile, giving up will leave you, well, renting. That might make sense if you decide the market is overheated. It can be OK to overpay a little as a homebuyer, provided you don’t plan to sell anytime soon. Over time, the market should make up the difference.
With a little preparation and some due diligence you and your family can navigate the intricacies of a hot real estate market. Chances are, if you’ve done your homework and prepared yourself, you’ll be in much better shape than your competition. As they say, luck favors the prepared. So, I’ll wish you much luck in the hunt for your dream home… even though we both know, it’ll be because of your preparation!
Cody Lee is a realtor at Williams Trew and is a top producer in Johnson and surround counties.