With homes flying off the market for top-dollar value and little-to-no inventory, one thing is certain about the real estate market: we are in a seller’s market. In addition to the rising home values, rent prices are also increasing – causing more people to decide to buy a home. While this may sound like a good thing, the increase in traffic and low inventory of homes available is not boding well for buyers. Why? To put it simply, they don’t have enough time to find and make an offer on a home they like. How do you compete in Central Texas’ hot market? Here are five tips to help you buy a home in our competitive market:
Get Loan Pre-Approval
Unless you are paying in cash, you are going to need to take out a loan to buy a home. To receive loan approval, a lender needs to look at your credit, debt, assets and more. Now, if you want to be competitive in a tight market, pay attention! Before you even begin searching for homes, you should visit a lender and receive pre-approval. What does this mean? Basically, it means that a lender has examined your financial situation and determined how much mortgage you can afford. DO NOT start viewing homes until you have this letter in hand. Why? To a seller, this pre-approval letter shows that you are a serious buyer and you can financially close the home. If you walk into a situation without this letter, a seller may pass you up for another buyer.
Avoid Contingencies
While contingencies can protect you as a buyer, they will more than likely place your offer at the bottom of the pile. This is a problem if you are buying in a competitive market. If you want your offer at the top of the stack, ensure your offer is appealing to the seller – i.e., no contingencies.
Make a Strong Offer
In a normal market, submitting an offer below list price is realistic. Even then, you have to be practical with your offer as offering 10 percent below the asking price will quickly turn off the seller. However, this changes even more in a competitive market. Trusting an experienced real estate agent is in your best interests in this situation.
Gather Your Best Down Payment
While the average down payment is around 7.6 percent of the median sale price, according to ATTOM Data Solutions, it is advisable to submit a larger down payment. How come? Sellers are more likely to accept an offer with a more substantial down payment. To a seller, this signals the buyer is more likely to qualify for a mortgage.
Look for a Hidden Gem
Turn-key homes are generally in higher demand than homes that require renovations. With this in mind, a home that doesn’t include everything on your wish list may come with less competition and a lower selling price. This home, while requiring renovations, could be customized into your dream home. Just one thing here: don’t pick a home that needs too many improvements. Why? It may end up costing you more than you saved – housing code regulations, foundation problems, etc.
In general, it is important to search for ways to show you are a serious buyer – especially in a competitive market. A buyer with a pre-approval letter, a substantial down payment and more, are more appealing to a home seller and make you more competitive.
Do you have any questions about buying a home in the Central Texas area? Contact us today!