Buying a home is an exciting process, but it can also cause a considerable amount of stress, especially if you’re buying in a competitive housing market. Fortunately, there are plenty of ways for you to stand out from the crowd and land the home of your dreams.
It’s likely that a seller in a hot market will have multiple offers, so you need every advantage you can get to capture their attention. It's also a good idea to have an understanding of mortgages and what you may need during your home-buying experience. Here are six tips and tricks that will catch a seller’s eye.
1. Be Preapproved for a Mortgage
Sellers in hot markets can only accept one offer at a time. If yours includes a preapproval letter from a mortgage lender, the property owner will know how much you can borrow. Even if your offer isn't the highest one on the table, a preapproval can give a seller a lot of confidence in your ability to fund the deal and close quickly when compared to other buyers.
Getting preapproved benefits you as well. For one thing, it tells you how much you’re likely to qualify for so you can focus your search on homes that are in your price range.
A preapproval can also help you strategize on how you’re going to make an offer. Let’s say you’ve been preapproved for $250,000. Rather than looking for homes at the top of your budget, you might opt to see houses that are $235,000 or $240,000. Because you’ve been preapproved for $250,000, you can make an offer above asking price if you find a place you love and you know lots of other buyers are interested in it.
2. Make Your Best Offer
While everyone loves a bargain, you may not find one in a hot real estate market. Trying to underbid in a seller's market means you'll probably lose to a competitor. While you shouldn't buy more house than you can afford, be aware that homes often sell for more than their list price when multiple buyers bid on the same property.
If you’re not sure how much you can afford, use a mortgage payment calculator to determine how much you can afford. Running the numbers before you look for a house, and especially before you make an offer, is extremely helpful because you have to think beyond the loan payment itself. If your down payment is less than 20%, you may have to pay private mortgage insurance, on top of your homeowners insurance and taxes.
A calculator can help you get a sense of the true cost of your mortgage, and that will help you figure out what you can really afford. Again, when you know your viable price range, you can really zero in on the properties that are within your budget. Then you’ll be in a better position to make an offer, since you won’t be worried about getting in over your head or being denied for the amount you need.
3. Forget the Small Stuff
When you look at homes in a competitive market, don't fall in love with anything that is separate from the actual property, such as window treatments, appliances or porch furniture. Trying to negotiate for extras could cause you to lose the deal because sellers want to get the best price for their homes. They may decline your offer if they’re worried about getting mired in details about the aesthetics, as they want to work with someone who is sure about the house and ready to move forward.
Rather than get hung up on small details during negotiations, stay focused on the most important elements — is the roof sound? Are there issues with the foundation? Does the plumbing work OK? But make a note of any decorative touches or stylistic decisions that catch your eye. You can always replicate them once the house is yours.
4. Act Quickly
When you find a home that you really want to buy, you can't deliberate too long. Time is of the essence when you're competing with buyers that have their hearts set on the same property. Make a list of all the features of a home that are non-negotiable and submit an offer when you find them.
The time factor is another reason to get preapproved. If you wait to apply for preapproval until you find a house, it may take a lender several days to issue a decision. Other buyers will be touring the house during that time, and they may even submit an offer. Houses go really quickly in hot markets, especially when mortgage interest rates are low. You want to be prepared to make an offer as soon as you’ve found a property you like.
5. Form a Bond With the Sellers
If you know that you’re not the only buyer interested in a particular house, you can make a personal case for the seller to choose your offer by including a letter with your offer explaining why you want the house. Maybe you grew up in this neighborhood and want to raise your children in the area, or you’ve fallen in love with their beautiful garden and vow to maintain it once you own the home. Perhaps there’s some personal connection on which you can draw — the seller attended the same college as you, or you’re both from the same city.
There’s no guarantee that a seller will be swayed by your personal pitch, and your letter won’t carry much weight unless it’s attached to a compelling offer. But it could tip the scales in your favor.
6. Work With a Real Estate Professional
Be sure to work with a real estate agent known for top-notch communication and negotiation skills. Having an experienced professional on your side gives you a huge leg up. Ask family and friends for local recommendations, especially if they’ve recently bought a home in the neighborhood you’ve been eyeing. You want to work with an agent who knows your favorite areas well and can advise you on a realistic price range and what a competitive offer there will look like.
You may even contact a few different agents to get a sense of their personalities and the types of clients they typically help. Buying a house can be stressful and emotional, and having an agent you trust and feel comfortable talking to can make it much easier.
Additionally, if you’re a first-time homebuyer, you might want to do further research on buying your first home.
About the Author
Laura Adams is a writer for MoneyGeek. She is a personal finance expert and award-winning author of multiple books, including “Money Girl’s Smart Moves to Grow Rich.” She’s been the host of the popular Money Girl Podcast, a top weekly show on iTunes, since 2008. To learn more about Laura, visit LauraDAdams.com.