I have been watching it happen over the last 6 months. The economy is improving slightly. Unemployment rates have dropped or stayed flat. Personal income has stayed flat. Debit ratios have fallen. Interest rates have hit historic lows. All of these items have created the perfect storm for home buyers.
With more confidence in the economy and job security, buyers are once again venturing into the housing market only to find there are no homes for sale. Home owners who can afford their homes are staying put. Builders stopped building and are only just now ramping up new construction again. Under-water home owners are finding new programs to help them hold onto their homes. The number of foreclosures is dropping.
After ruling the roost for so long, buyers are now finding they have to compete for the few available homes for sale. Multiple offers are everywhere, more so at the entry-level of the market. Sellers are making more demands from buyers to prove they are qualified to purchase a home. Sellers are less willing to give concessions if they don’t have to.
So with all this news what does a home buyer need to do to compete? First, make sure you are pre-approved for your mortgage. Pre-approval means a lender has done a more thorough check on the buyer including pulling credit, checking employment and verifying money in the bank. Wells Fargo has gone so far as to guaranty a pre-approved buyer an actual loan. Not all lenders have gone this far, but we may see this trend becoming more popular.
Second, work with an agent who knows how to write a good offer. Sounds silly I know, but recently one of my buyers was in competition with 10 other offers on an entry-level home. Because I had read all the documents the seller published with their listing, I was able to write my client’s offer to match the seller’s requirements. I received a call from the listing agent who told me, that while our offer was lower than some of the other offers, they were willing to work with us because our offer was so complete. This extra step, got my client they home they wanted, while the other offers fell by the wayside.
Third, have all your ducks in a row. Most sellers want to make sure they aren’t wasting time with a buyer who can’t perform. Lots and lots of transactions fall out of escrow simply because the buyer couldn’t do what they said they could. Be willing to show a seller you are serious about buying. Be willing to share additional financial information to prove you have the goods. Don’t put yourself at risk of disclosing personal financial information, a good agent can tell you how to balance disclosing information without risk, but be willing to work with a seller just as you would like them to work with you.
Last, be prepared to offer something of value to the seller to make your offer more attractive. A seller recently wanted to sell his home but wanted to wait until his daughter graduated from high school before he would act. My buyer wanted the home so much that he offered the seller permission to remain in the home for 2 weeks so the family could watch their daughter graduate without disruption. Did my buyer have to give them 2 extra weeks? No, but this small delay got them the house and made everyone happy.
Get pre-approved for your loan, write a clean, complete offer, be a little flexible and provide something of value; these are the things that just might make the difference between having your offer accepted and being just another back-up offer.