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Buying in a Tight Market with Low Housing Inventory

Written by on Friday, 17 January 2014 6:27 am
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Increase your chances of getting your first, next, dream home in a competitive housing market, and lower your chances of losing out to another buyer!

Get prequalified for a mortgage. You’ll be able to make a firm commitment to buy and your offer will be more desirable to the seller. Make sure that lender is someone who was referred to you preferably. I say this because not all lenders “are created equal.” Good example, I had a first time home buyer contact me yesterday. She had called a local lender and gone online to their website to get “pre-qualified” and was quickly emailed a glowing pre-qualification letter saying she was pre-qualified to buy up to $150,000.  I also sent her to my lender, that I refer all my Buyer clients and customers to, and he called me a few hours later to tell me that he was not comfortable sending a pre-qualification letter based on $120k much less $150k! 

 

The issue, the income she put in his online pre-qualification system (just like had been provided to the first lender) was an income she could not verify.  The lender I referred her to asked the right questions and made sure the figures online were verifiable and therefore he could give me (or not) a pre-qualification letter stronger than the other guy because he then had her bring in her taxes and other income docs to verify that she understood what he (or any lender) needed to make a loan happen and to take care of any red flags upfront before the home search and not fail later!  A Realtor referral on lender is going to be your best because odds are that Realtor will have used that lender for some time and is only using them today because they don’t fail. They close loans and close home sales. That makes everyone happy!

 

Stay in close contact with your real estate agent to find out about the newest listings. This goes both ways actually.  Hopefully your agent is also in close contact to you with listing ideas as new listings hit the market and price changes or reductions occur based on your criteria.  Be ready to see a house as soon as it goes on the market — if it’s a great home, it will not last long. I know in several of the cities within our market that houses are going under contract in days not weeks right now so be ready to move quickly! Contrary to Zillow, and Trulia, they are not the best place to find new listings “quickly” as they are predominately third party sources for MLS data.  Your agent should have real time MLS data on his or her website that updates and can send you listing updates as they occur. I know when I upload a new listing to MLS it takes Zillow and Trulia about 2 days to update it as “for sale” on their sites. On my website for example new listings are updated “every 15 minutes!”

 

Scout out new listings yourself. Look at Web sites such as REALTOR.com, Zillow and Trulia, and drive through the neighborhood to get a feel for any possible new construction that might not as yet be in MLS or new homes that are in MLS but you want to see what the builder is doing first hand along with viewing any updates in the process since the last time they took photos of the home “at drywall” or whenever. If you see a home you like, text your agent the address. Your real estate agent will schedule a showing or get more details and confirm status and availability. Remember we are seeing homes going under contract in days not weeks anymore so it always pays to check Active listings in MLS to make sure they really are Active and not Under Contract before spending too much energy on them!

 

Be ready to make a decision. Spend time in advance deciding what you must have in a home so you won’t be unsure when you have the chance to make an offer.  Yet also make sure you are willing to bend and on what criteria you will make an exception! If it is new construction, then you probably will be able to customize a pre-built home anyway you like, but if it is a resale then you may not get everything you want today, but can you find the “best” right fit for your family with available inventory? If you are not pressed for time then you can wait on it. If you need to buy quickly, focus on absolute needs not wants.  I see the old saying in sports play out, “over analysis leads to paralysis.”  Happens in home buying too!

 

Bid competitively. You do not want to start out offering the absolute highest price you can afford, but don’t go too low today in order to attempt and get a deal. In a tight market with low inventory like we see right now you’ll lose out.  New construction is another area that is moving quickly.  Home builders are getting “list” or asking price.  I have seen prices on new homes increase about 8% every six months for the past two years and they keep selling them as “pre-sales” before the ground is cleared so don’t expect they will take less than ask. On resales I am seeing the average sales to list price at about 95%. Offering 80% of list price won’t get you anything but an offended seller who might not want to work with you!

 

Keep contingencies to a minimum. Restrictions such as needing to sell your home before you move or having an extended inspection or due diligence can make an offer unappealing! In a tight low inventoried market, you’ll probably be able to sell your house rapidly. Get your home on the market as soon as feasible and strive to get it shown and under contract before getting too serious about making offers on purchases.

 

Don’t get caught in a buying frenzy. Just because there’s competition doesn’t mean you should just buy it. I always encourage people from a personal perspective on multiple offers on homes to think seriously about walking away. I say this because you don’t want to bid up a home 3,5, 8% just because you are bidding against other buyers who are also emotionally charged. Leverage and negotiations go out the window with multiple buyers. Never a good thing, and there will always be another one that you will find that you like just as much without paying the premium of a multiple offer bid!

 

Recently I had to go back to some buyers I have been working with since August.  They had felt they wanted to be in a certain price range.  Been leasing for a couple of years, and over the past year they have wanted to buy.  I expressed to them that while they were looking for that perfect home, prices had gone up 19.8% in the Metro Atlanta area and mortgage rates had gone up about 150 basis points to today at about 4.5 to 4.625%.  Waiting on that right perfect property can hurt!  Sting a bit quite actually. With rates projected to be up another half to full point in the next six months (certainly during 2014) and prices up again another 4-5% this year, now is the best time to zoom in on just what you need and make that purchase! There will probably not be a better time in the next year or two or ten to buy than right now!

 

For more information about the home buying process please contact me! I would love to be of assistance! 

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